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Three’s O2 merger is off: what happened and what’s next?

As the dust clears on the failed merger, here's a look at the new landscape for customers and networks.
o2 store

While BT saw its multi–billion pound deal for EE given the green light earlier this year, Three owner Hutchison has had no such luck in its attempt to buy O2.

The merger has been thrown out by European Commission regulators on the advice of their UK counterparts, leaving O2 ripe for takeover by another company.

So, why was the deal stopped in its tracks? And what next for Three and O2? Read on and we’ll reveal all.

Why did the European Commission block the merger?

eu flag european union

Europe’s competition commissioner Margrethe Vestager’s reasons for the blocking deal appear relatively simple.

Her concerns, she said, were that that a tie–up between Three and O2 in the UK would hit competition and push prices up for consumers.

"The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses," she said.

"We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality."

But is that the only reason?

Things get more complicated when you look at the wider picture.

Vestager’s concerns came after the UK’s Competition and Mergers Authority wrote to EU officials saying they needed to block the deal.

Their worry was that Three owner Hutchision would wield too much control over mobile infrastructure in the UK, giving them an edge on EE and Vodafone in the process.

Those against the EU’s move say preventing the deal could slow down the development of futuristic 5G networks in the UK.

So why did BT get hold of EE when Three was denied its merger with O2?

BT and EE merger

The reasoning is fairly straightforward.

Although regulators said they were concerned about BT’s EE buyout hampering competition in general, they weren’t worried specifically about the mobile market.

Why? Because BT is a small player in mobile, with a network which piggybacks on another carrier. It didn’t own mobile infrastructure, unlike Three.

What does Three have to say?

Hutchison, Three’s owner expressed its disappointment.

“We are deeply disappointed by the Commission’s Decision to prohibit the merger between Three UK and O2 UK.

“We strongly believe that the merger would have brought major benefits to the UK, not only by unlocking £10 billion of private sector investment in the UK’s digital infrastructure but also by addressing the country’s coverage issues, enhancing network capacity, speeds and price competition for consumers and businesses across the country and dealing with the competition issues arising from the current significant imbalance in spectrum ownership between the UK’s MNOs.

And what about O2?

O2 was more circumspect. A spokesperson told the BBC: "We work in an industry of constant change and have learnt how to manage that change better than most.

"Regardless of what happens next, we will continue to deliver for our customers as we always have."

What next for Three and O2?

Hutchison has now turned its attentions to acquiring 3 Italia, its O2 deal now dead in the water. For O2, a takeover still looms.

Reports suggest that Liberty Global, owners of Virgin Media, are circling. That was made explicit when CEO Mike Fries said it would be ‘strange’ if it didn’t consider making an offer.

That deal would likely suit competition regulators more, as it’s in line with BT’s deal for EE.

It could also provide better ‘quad play’ options for consumers, offering cheaper deals for bundled mobile, landline, TV and broadband.

Category: Features
Tagged: ee, o2
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