Strasbourg, 11/05/2016 (Agence Europe) - On Wednesday 11 May, the European Commission announced its decision to block plans by Hutchison to purchase O2, the British subsidiary of the Spanish telecommunications group Telefonica.
“The operation would have created a new market leader”, explained European Commissioner for Competition Margrethe Vestager. According to the Commission's in-depth investigation, the entity born of the merger would have faced competition only from two mobile network operators, Everything Everywhere (EE) and Vodafone. Its market share would have been more than 40% and it would, according to the Commission, have had less incentive to compete with Vodafone and EE.
“We have strong concerns that consumers would have had less choice finding a mobilepackage that suits their needs and paid more than without the deal. It would also have hampered innovation in the development of network infrastructure in the UK, which is a serious concern, especially for fast-moving markets”, Vestager added. She explained that the operation would have fundamentally changed the competitive dynamic in terms of network infrastructure. Currently, one network is shared by Three and EE and the other by Vodafone and O2. The merged entity “would have been given a full overview of the network plans of its two biggest competitors. This is not a healthy state of competition, not for the competitors and not for consumers”, the Commission argued.
The Commission also noted that the planned operation would have reduced the number of virtual mobile network operators willing to host virtual operators. Virtual mobile network operators need access to the infrastructure to provide mobile services to consumers. This reduced number would have put virtual mobile network operators into a weaker position to obtain favourable wholesale access conditions.
The European institution did not accept the undertakings proposed by the parties. “In this case, an effective remedy would, for example, have been the creation of a fourth mobile network operator to replace either Three or O2 in one of the network-sharing agreements and there were more companies interested in investing on this basis”, the commissioner explained. However, Hutchison was not inclined to accept this offer or any other similarly effective remedy.
Vestager then went on to hit out at views previously expressed by German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker when he was running for the European elections as head of list of the European People's Party. In 2014, Merkel said that a balance should be struck between power on the market and competition “so that European companies can score points at international level”. Juncker said that the application of the European competition rules needed to be rethought for the digital market (see EUROPE 11076). “We often hear that telecoms consolidation in Europe is necessary to ensure network operators are profitable to allow them to invest in networks. I have not seen compelling evidence to support it. And the UK mobile market shows the opposite”, the commissioner said. (Original version in French by Elodie Lamer)