The Three/O2 merger is set to be blocked by the European Commission, according to reports by Bloomberg.
Three UK owners CK Hutchison has made a number of concessions to alleviate UK competition concerns if the deal should go ahead, including divesting spectrum to Sky, Tesco Mobile and Talk Talk.
However, these remedies have failed to sway the European regulators overseeing the deal. According to sources close to the merger, the watchdog doesn’t believe the concessions will create enough rivalry to prevent price hikes. Instead the EC is waiting for Three and O2 to offer to sell part of their networks to a new rival.
Barring any last minute concessions from Hutchison, the takeover is expected to be formally blocked ahead of its 19 May deadline. Hutchison is believed to have now set its sights on gaining approval for a similar merger in Italy.
Pressure on the European Commission to block the deal has increased over the last week as the possibility of Britain exiting the European Union draws closer. Britain’s in/out EU referendum is only a month after a decision on the Three/O2 deal is set to be made. This means the Euro watch dog could be making a decision on a market that could be outside its jurisdiction just five weeks later.
Merger countdown begins
With a month left to go until a decision is made, UK regulators have ramped up criticism of the deal. The Competition and Market’s Authority publically slammed the merger last week, branding it as ‘materially deficient’. This followed Ofcom’s CEO, who a few months back announced that the merger would negatively impact UK pricing. Hutch hit back by stating that the CMA’s views have ‘no legitimate status’ in the merger process.
Hutchison’s promises of a UK price freeze and divesting spectrum to bolster rival networks were also slammed by a number of industry figures, who told Mobile that it would only benefit larger MVNOs, locking small networks out of the market.