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Three chairman promises five-year price freeze after O2 merger

Three chairman Canning Fok pledges a price freeze and a £5bn network investment if the acquisition of O2 is allowed to go ahead

Canning Fok, co-managing director of Three parent CK Hutchison and chairman of Three, has issued three pledges to ease fears over the impact of its proposed acquisition of O2 on the competitiveness of the UK market and to butter up the European Commission in the hope of a favourable outcome.

In an open letter, Fok said the combined Three-O2 mobile network would freeze prices for consumers of voice minutes, texts and data for five years following completion, promising that any cost-efficiencies achieved post-acquisition would be passed on to customers, and like-for-like bills would go down.

He also pledged to pump £5bn into the combined UK businesses, which he claimed was about 20% more than is being spent today. A more efficient spending plan would improve quality of service in terms of network capacity, coverage, reliability and speed much more quickly than if Three and O2 remained standalone networks, he said.

Finally, Fok said Three-O2 would offer for sale fractional shared ownership interests in its network capacity to allow other meaningful competitors to offer mobile services on a more level playing field, something he said was unprecedented in the wholesale market.

“Over the last 12 years, our group has spent billions to enable Three to be a major competitive force in UK mobile,” he said. “From the outset, we have followed the principle that as technology improves, people should always get more and pay less for their mobile services. That has not always made us popular with our competitors.

“Not all our efforts have succeeded and sometimes we have had to retrench when conditions in the market or spectrum auction outcomes have made our efforts unsustainable. But we have always strived to be a consistent force for consumers, and I believe our reputation as the challenger in Britain is the proof of that.”

The publication of Fok’s open letter comes on the eve of a ‘statement of objections’ from Brussels, which telecoms analyst Kester Mann of CCS Insight said was likely to raise concerns over the prospect of negative outcomes for consumers.

“A similar publication concerning the planned merger in Denmark between Telenor and TeliaSonera in 2015 ultimately proved a precursor to its collapse,” he said.

“The onus will fall on CK Hutchison to propose satisfactory remedies to allay the commission’s concerns. Today’s announcement is the first step, but it is unlikely to appease competition chief Margrethe Vestager, who has adopted a hard line on in-market mergers.

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“More likely, CK Hutchison will need to facilitate the entrance of a new player to retain the status quo of four national network providers. As such, its pledge around selling slices of network capacity will be the most heavily scrutinised.”

Fok also hit out at Ofcom, which on 1 February issued a lengthy statement in which chief executive Sharon White set out a number of objections to the deal.

Fok said newspaper readers would have been “bemused” by a blizzard of commentary and speculation about telecoms competition in the UK.

“We might be forgiven for wondering why Sharon White, the new CEO of Britain’s telecom regulator Ofcom, felt the pressing need to go public with her conclusions about the effects of CK Hutchison’s proposed acquisition of O2 without having asked for, or heard, our views in response to her concerns,” he said.

Fok said the combination of Three with O2 would enable it to stand up to the new “leviathan” of BT and the “old top-of-the-heap predator” Vodafone.

“It is the only way we can guarantee that, five years from now, customers will still be getting more and paying less for mobile services,” he added.

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You'd think this would be a very good idea whether or not Three acquires O2 as planned. Perhaps this signals a slowing of egregious corporate profits. Perhaps....
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