CK Hutchison’s remedies for its takeover of O2 have been slammed by industry figures, who claim it will give Three the power to push rivals out of the market.
The Three UK owners put forward a number of suggestions to the European watchdog overseeing the deal. In a bid to ease wholesale competition concerns, Hutch pledged to launch two new MVNOs in the UK as well as give up spectrum to create a fourth mobile player in the UK.
According to Vivian Woodell, CEO of the Phone Co-op, the terms set out in the remedies dictate that whoever purchases either all or a portion of this spectrum will be locked into the deal for 10 years.
He explained there would be no opportunities for the new entrant operator (NEO) to sell or wholesale the business. Woodell claimed that Three UK would also have the power to pass on costs to the new owner. The Phone Co-op boss believes this inability to sell the spectrum could cause a new player to go out of business, a result that Three could benefit from.
‘The business can’t be sold on for 10 years and there will be no wholesale opportunities. Whoever purchases this spectrum can’t sell on their business and there will be no incentive for Three to stop them going bust.
‘Three has the ability to pile costs on them and it can pass on costs that it may be in a better position to pay. And of course the new operator can’t refuse this. The remedy says that if you buy 20% of spectrum you need to pay 20% costs.’
A long-running debate on the Three/O2 merger has been about the effect it will have on the UK wholesale market. O2 has been vocal in its support of UK MVNOs, adding TalkTalk and Sky to its roster and publically affirming its support of the wholesale market.
O2 CEO Ronan Dunne has spoken out on a number of occasions, stressing the importance of MVNOs to the market. ‘The balance between MVNO and MNO offerings needs to be there and is vital for the UK market,’ he said. ‘Maintaining choice for the consumer is also hugely important.’
The International MVNO Association has expressed concerns to Mobile over how the remedies will impact small MVNOs – founder Frankie Spagnolo claimed that the suggestions put forward so far will only benefit the big mobile brands. It was a sentiment echoed by The Federation of Communications Services – CEO Chris Pateman accused the Three UK owners of trying to shut smaller MVNOs out of the market.
‘The EC seems to think that mobile services can only be delivered by huge organisations,’ he said. ‘The most flexible and useful service to consumers will be delivered by freeing the market to enable new competition models to emerge, otherwise the status quo will continue. Why do you have to be of a certain scale to deliver profitable value-added services to a niche of customers? All you need is access to spectrum and competitive prices – and while they [the EC] continue to presume otherwise, smaller players will be excluded from market growth.’
Mobile has contacted CK Hutchison, Three UK and O2, who all declined the opportunity to comment.