3 key to competition in UK mobile market, says OFT

3 key to competition in UK mobile market, says OFT

3 is essential to competition in the UK mobile market, having emerged as an aggressive competitor that has captured more market share from Orange and T-Mobile than its total market share would suggest, according to the Office of Fair Trading.

These claims are revealed in the OFT’s submission to the EU Commission, published today, on the proposed Orange/T-Mobile merger.

The submission was published in the midst of reports yesterday that Orange and T-Mobile have offered concessions to ensure the merger goes ahead, which include a deal with 3 to share network infrastructure and an agreement to give up 25% of its 1800MHz spectrum holding.

The OFT submission, sent to the EU Commission in January, sets out the regulator’s concerns and asks for permission to review the proposed merger.

The submission reveals that the OFT’s key concern is that 3, which currently shares infrastructure with T-Mobile, will be undermined by the merger, which in turn would affect competition. It also raises concern over the amount of spectrum the joint venture would accrue and its impact on LTE services in the UK.

Arguing the importance of 3’s role in the UK market, the OFT points to churn data ‘which indicates that H3G (Hutchinson 3G) captures more market share from Orange and T-Mobile than its market share would suggest’.

The regulator adds: ‘On balance, therefore, the OFT's view is that H3G's role as a driver of competition in UK retail mobile telephony appears to be greater than either of the parties (Orange and T-Mobile).’

The OFT also examines Orange and T-Mobile’s argument that by merging they will not reduce competition in the market.

Referring to both operators' parent companies as ‘the parties’, the OFT states: ‘More generally, the parties point to Orange and T-Mobile having lost market share over the past years and, in particular, to T-Mobile's ailing financial condition as being indicative that neither party can be considered to be a maverick.’

However the OFT disputes this assessment, arguing that: ‘T-Mobile could display some of the features that would be associated with a maverick role in the UK telecommunications market.’

It adds: ‘There is evidence to suggest that T-Mobile has (a) often been a price leader in the market and continues to be an aggressive competitor on price, particularly in the prepaid segment and the sub £30 post pay segment; (b) shown pricing innovation; and (c) played an important role in the development of mobile data and broadband services in the UK.’

The OFT and the EU Commission declined to comment on reports that the EU Commission is to give the merger the green light following the deal made by both operators with 3 and their offer on spectrum share.

The EU Commission has until 1 March to decide whether it will grant the OFT’s request to investigate the merger application.

Written by Mobile Today
Mobile Today

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