The possibility of Britain exiting the European Union is increasing the pressure on the continental regulators regarding its decision on the deal for Three’s owners CK Hutchison to buy O2.
The Competition and Market’s Authority (CMA) became the latest UK body to come out publicly thisweek to say that it felt the deal was ‘materially deficient’. A few months ago, Ofcom CEO Sharon White went public with her view that the deal could have a negative impact on pricing.
The date for Britain’s in/out EU referendum is just a month after a decision on the merger is taken.This means that the regulator could be taking a huge decision on a market that could be outside its jurisdiction five weeks later. It’s clear that the UK’s regulators want to make known their displeasure with the current terms as loudly as possible – and with the EU decision set so close to the deadlinefor the merger, the pressure on the EU to respond to the UK regulators is even more intense.
Opponents of the deal in its current form have been quick to press this point home with only two weeks remaining for an agreement to be found.
Frankie Spagnolo, the founder and director of the international MVNO association, said: ‘Having the CMA go public with a letter criticising theremedies relating to the O2/Three merger increases the pressure on the European Commission(EC). Following Sharon White’s comments on the merger, we now have both major regulatory bodies in the UK openly expressing serious concerns about the remedies on the table.
‘Britain decides whether it will remain in the EU just a month after the decision on the merger is taken. The commission must therefore think long and hard about whether it allows a deal to go through that has so much local opposition. Especially in a jurisdiction over which it may not even have power a month later.’
CK Hutchison has remained steadfast in the face of the CMA’s robust criticism, emphasising the fact that it will be the European Commission making the decision, in a statement responding to theletter: ‘It is no surprise that the CMA opposes the merger. It always has, and so has Ofcom. But it isfor the Commission to assess any competition concerns, on the basis of the facts and proposed remedies.’
Pressure on the EC to make the right call on the merger is also being ratcheted up by a number of the affected parties. Vivian Woodell, CEO of the Phone Co-op, praised the regulator for speaking up,but said that it should have gone further in its criticism: ‘The CMA is right to say Three/O2 should beregulated on the basis of more than the current offer. It is right that the remedies are inadequate,but it does not make the point strongly enough that we need transparency in the wholesale market– that is really what will make it a thriving environment.’
Spagnolo also believes that the regulator is at a crossroads – she revealed that the organisation hadbeen working with Ofcom’s Sharon White to ensure that the seriousness of the decision was communicated to the EC: ‘Of even greater significance is the precedence that this ruling by the EUwill set in terms of wholesale network access and the constraint that it can exercise on competition.
'If approved, the current remedies proposed by Hutchison could vastly reduce the ability of MVNOsto compete with the major networks. I spoke to Sharon White on Friday, and the iMVNOx is working closely with both the EU Commission and Ofcom to make sure that MVNOs don’t lose out in theprocess.’
The European Commission declined to comment on the remedies or the referendum. However it did confirm to Mobile that it had received the CMA’s letter and that its investigation was ongoing.