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