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CMA to probe Three and O2 over BT-EE merger

The Competition and Markets Authority will run the rule over Three's proposed acquisition of O2 as it makes up its mind over whether or not BT should be allowed to acquire EE

Hutchison Whampoa’s £9.5bn acquisition of Telefónica UK will be a deciding factor in whether or not BT’s £12.5bn acquisition of EE is allowed to go ahead, according to the Competition and Markets Authority (CMA).

The CMA has published an extensive document revealing what issues its panel members will assess when evaluating the BT–EE deal, during which it will decide whether or not letting the purchase go ahead will damage competition.

It said the parallel Hutchison Whampoa–Telefónica deal, which would result in the union of mobile networks Three – also known as H3G – and O2, was relevant to its inquiry into BT.

“O2 and H3G are major players in the UK telecoms market, [so] we will consider the potential implications of the proposed merger and the European Commission’s investigation for the competitive conditions in the UK,” said the CMA in its document.

The CMA noted that although the Three O2 deal may not go ahead for any number of reasons, it was still possible it may also be called on to investigate the deal separately, depending on the European Commission’s decision.

Other areas under the microscope will include the supply of retail mobile services to the general public, wholesale mobile services to mobile virtual network operators, such as Tesco or Virgin, and mobile backhaul services, which BT provides to all four UK mobile network operators (MNOs).

The inquiry will also extend into fixed broadband services, where BT provides a number of wholesale services to EE and other operators on the Openreach copper and fibre networks.

“The inquiry group of CMA panel members must decide whether – if the acquisition is completed – a relevant merger situation will be created and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition in any market or markets in the UK for goods or services,” said the CMA.

BT, which referred itself to the CMA for further investigation in May 2015, has argued that its broadband and mobile market shares would remain under the threshold at which regulatory action would be justified.

The telco also believes the ability of its mobile and landline rivals to compete using the Openreach network would not be affected by the acquisition of EE, although matters are complicated due to Ofcom’s strategic digital communications infrastructure review, which has decided to give the idea of splitting Openreach off from BT serious consideration.

Stakeholders will have until 31 July 2015 to submit their views, and the CMA’s inquiry group must legally deliver its report by 23 November 2015.

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