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BT EE takeover a serious risk to competition, says CMA

The Competition and Markets Authority is to fast-track an in-depth investigation of BT’s acquisition of EE, citing real concerns over competition

BT’s planned multi-billion takeover of mobile network operator EE represents a clear and present danger to competition in the UK communications market, according to the Competition and Markets Authority (CMA), which has referred the bid for an in-depth investigation following an earlier consultation.

“BT and EE are leading suppliers of UK telecommunications services, and together they will have a strong presence in many telecommunications markets. They also supply important inputs at the wholesale level, which enable other communications providers to compete at retail level in the provision of mobile services,” said Andrea Coscelli, CMA executive director of markets and mergers, and decision-maker in this case.

“We have found there is a real risk the merger could reduce their incentives to supply these inputs, and this could have a detrimental impact on the retail mobile market,” she added.

As the largest providers of fixed communications and mobile communications in the country respectively, BT and EE supply a number of services to providers, including backhaul and other mobile services.

The CMA said the transaction had met the test for referral, as it gave rise to “a realistic prospect” of lessening of competition around wholesale access and call origination services to mobile virtual network operators (MVNOs), such as Tesco Mobile and Virgin Mobile, and fibre mobile backhaul services to other mobile network operators (MNOs).

The referral is in accordance with a request for a fast-track to phase two made in May by BT. However, BT argued in its submission that the acquisition would actually be good for competition.

“The acquisition will lead to greater competition, given our history as a natural and willing wholesaler, enabling other companies to use the networks we own,” said Gavin Patterson, CEO of BT.

“We provide wholesale access to companies in the broadband market, and we are happy to support others who wish to compete in the mobile market as well,” he added.

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Other submissions received during the first phase of the consultation had expressed significant concerns about competition, the CMA revealed, but the watchdog said it had not taken those concerns into account when making its decision because the referral test met all the criteria.

Third parties will have another chance to present their views on the merger during phase two, which will be overseen by an independent panel and will not be restricted to considering issues around wholesale and backhaul access.

Other communications providers have been vocal in calling for BT to be reined in after the £12.5bn planned takeover, with some believing structural separation of its broadband access business, Openreach, would be an appropriate means to check BT’s market dominance.

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