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Three and O2 risk slow death if merger not approved

Reports suggest Hutchison Whampoa will argue it does not hold enough mobile spectrum to compete effectively against the BT-EE combination

Hutchison Whampoa will tell the Competition and Markets Authority (CMA) that it must be allowed to merge the Three mobile network with O2 if it is to remain a viable competitor in the UK market.

According to the Sunday Telegraph, the Hong Kong-based communications conglomerate is expected to argue that if it is not allowed to bring together the Three and O2 mobile networks in the UK, it risks being squeezed out by BT.

The operator’s case will hinge on the fact that the BT-EE combination will control around 45% of the UK’s mobile radio spectrum, whereas Three currently owns just over 12% and O2 owns just over 15%.

The UK’s fourth operator, Vodafone, controls 28% of the country’s spectrum, meaning the combined Three-O2 will be level-pegging with it. However, it would still be substantially behind BT-EE, which will benefit from a tranche of spectrum awarded to BT during the last spectrum auction in 2013.

Imperfect model

O2 chief executive Ronan Dunne told the Sunday Telegraph that the government should be concerned O2’s parent, Telefónica, and EE’s co-parents, Deutsche Telekom and Orange, were all trying to get out of the UK market at the same time.

Dunne suggested the rush for the exit implied that “there is something not quite perfect in the model”.

The CMA is already looking into the Three-O2 merger as part of its due diligence on the £12.5bn BT-EE deal and may decide to begin a more formal probe in the near future.

“O2 and H3G [Three] 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.

BT has consistently argued that, even though it will hold almost half of the currently available mobile spectrum, its market share would remain under the threshold at which regulatory action would need to be taken.

However, BT is facing down a growing clamour from other parts of the industry that some of conditions are attached to the deal, which could include it being forced to structurally separate its Openreach infrastructure unit.

Read more about the Three-O2 merger

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Dunne's comment makes sense following BT's approach to EE both FT(orange) and DT commented that the JV was never going to last and given DT's drive to save on op ex costs with EE that does not bode well for investment. So it's clearly good that BT have stated that the purchase (it's no merger of BT and EE, get real) opens up investment as well as cost savings.... We will see what that entails... How many job losses?
O2 owner is also in financial trouble H3G never made a profit until 2012 . 12 years of loss!
Given that providing higher speed access and more sites for rural coverage, costs money. Vodafone also not showing good returns and will also have to invest ..... How will the UK have the best mobile coverage? Fast access? Lower bill?
Not by having shadow companies providing more to choose from but splitting the market and reducing the margins.
That's not to say we should have less operators but there has to be a profit to pay the bills and provide employment... Too much in this field is outsourced and much of that off shore ... That's not good.
The public purse looks to be providing money for fixed line broadband but not for mobile! There's many complaints that rural areas have slow speeds / no coverage... It's not a right to have mobile coverage or have high speed and if you have been miss sold a phone that's another issue.. You get what is paid for and increasingly it harder to obtain sites for masts and when you have them hard to gain access to maintain them and site providers wanting more money when they need to be upgraded (even if that upgrade has no physical impact) and to site share.

Why do you think that the mobile mast world is actually 2 share agreements , vodafone and O2 and EE and 3 it saves cost.
The spectrum aspect is an interesting one did not the networks bid and pay for spectrum of com again favoured 3 but at at cost they did not take advantage of... So if EE now has more well they paid for it , Along with BT. However don't be foolled into thinking that limits coverage and speed it's one element more impacting is the backhual transmission and number of cells/sites.
Small cells are the future with LTE+ (4g+) and 5G with wifi handoff. That's why BT is in a good place and the others don't like it.
Split up BT and open reach and again investment could dry up makes no sense have regulated products that are also provided by BT wholesale and well as the open reach last mile. Why have other telco's (CP) not taken more advantage of LL unbundling and invested, it's cost so they buy the managed Ethernet service from bt wholesale and have open reach connect it.
When you invest in your own infrastructure you also have to maintain it and be held accountable when it's dug up as with all outsourced product you try to get money back in service credits and hold another company accountable for SLA's but where has the pride gone where has the ownership aend to end of a service gone... Who can loose out when all this goes wrong the customer..... And then the network becomes slated on facebook.... But do they really care when the owner is outside the UK? No FT100 price to affect no real tie in to the UK having a great telecoms network ... Just a thought.
Hutchison have long been in the uk telecoms with phone reselling rabbit, microtel became orange and of course H3G and they have deep pockets but this time they have split the risk and shares in the expanded 3/O2 orange would have never been the fast success without them O2 has improved vastly over the last few years and 3 benefited with the tmobile and orange uk JV via MBNL lot of fat to cut off and and interesting technical job to bring together the networks. Could Vodafone and ee suffer .... Yes as O2 and 3 own mast they share EE has the complicated RAN share do goad and EE have legally binding contracts of course they do.
It looks clear that O2 and 3 stand a better chance of providing the network we all want to use as does BT and EE it's Vodafone that's looking vulnerable.
Ofcoms job is to keep its fair for the consumer if that means we more to three networks from four but its sustainable that would work. What's to stop another enterant into the market.... They could buy up the churned masts. there was a time when one company could not hold two licences remember when Vodafone had to sell orange off when it bought the parent in the early 2000. The futures... Unclear.