Three ‘Takes Legal Action’ Against EU Over Failed £10.25bn O2 Merger

CK Hutchison, Three’s parent company, is reportedly taking legal action against the European Union (EU) following the collapse of the proposed £10.25 billion merger with rival O2.

The European Commission (EC) blocked the deal on the grounds it would damage competition in the UK mobile market, a view shared by regulator Ofcom and the Competitions and Markets Authority (CMA).

The EC had previously been more open to consolidation, approving the merger of Three and O2 in Ireland for example, but research suggested prices had risen in markets where the number of operators had fallen from four to three as it would have done in the UK.

Three O2 appeal

Hutchison had promises to make significant amounts of bandwidth available to Mobile Virtual Network Operators (MVNOs), freeze prices and sell O2’s stake in Tesco Mobile, but in the end, potential remedy was deemed satisfactory.

The ruling has been appealed but it is unlikely the deal would be revived as Telefonica is now working on the reintegration of O2 within the wider group having abandoned plans for a sale.

But legal action would allow Hutchison could also seek compensation and a legal precedent that would make the climate for further consolidation in the market more favourable, according to the Daily Telegraph.

“CK Hutchison can confirm that it has lodged an appeal to the European General Court against the decision adopted by the European Commission on 11 May 2016 to prohibit CK Hutchison’s acquisition of O2 UK,” a spokesperson for the Hong Kong firm told TechWeekEurope.

Three, the UK’s smallest operator, has traditionally been a disruptive force, attempting to differentiate itself from EE, O2 and Vodafone with offers such as inclusive roaming, unlimited data and no additional fees for 4G. If part of a combined O2, it would have had less incentive to do this.

The proposed merged entity would have had more than 40 percent of the UK market, making it the UK’s largest operator. However Three remains the smallest and it is unlikely Hutchison will invest the £5 billion it pledged to if the deal was approved.

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Steve McCaskill

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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