EU halts Hutchison-O2 deal in new curb to telecom mergers

European Union Commissioner for Competition Margrethe Vestager talks to the media after the EU Commission prohibited Hutchison's proposed acquisition of Telefonica UK, at the EU Commission headquarter in Brussels on May 11, 2016. The European Commission today shot down Telefonica's blockbuster sale of British telecom giant O2 to Hong Kong group Hutchison on fears it would inflict higher prices on British consumers. Hutchison is controlled by one of the richest men in Asia, Li Ka-shing, and his buyout of O2 from Spain's Telefonica for £10.25 billion (14 billion euros; 15.2 billion USD) would have created Britain's biggest mobile phone company. / AFP PHOTO / THIERRY CHARLIER

 

Bloomberg

The European Union blocked CK Hutchison Holdings Ltd.’s bid to create the U.K.’s biggest mobile carrier, the latest setback to consolidation that telecommunications operators say they need to funnel money into new networks.
Hutchison’s plan to buy Telefonica SA’s U.K. mobile-phone business for as much as 10.25 billion pounds ($14.8 billion) and merge it with its Three unit risked raising prices and shrinking choice for customers, the European Commission said on Wednesday.
The companies’ pledges to increase investment and freeze prices didn’t do enough to appease antitrust concerns, the EU authority said.
“We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal,” EU Competition Commissioner MargretheVestager said in an e-mailed statement on Wednesday. “It would also have hampered innovation and the development of network infrastructure.”
The EU ban is a blow to tie-ups in the fragmented European mobile industry. Regulators cleared previous deals that reduced the number of operators to three on condition that the merging companies offer space on their systems to smaller rivals that don’t own their own wireless networks.
The U.K. is a vibrant market for these so-called MVNOs, or mobile virtual network operators.
“If you can’t find a way to clear four to three in the U.K., you’re probably not going to be able to find it anywhere else in the EU,” said David Cantor, a Brussels-based lawyer at Telecommunications Law & Strategy. “There were a lot of hopes that the commission and Hutchison would come to terms.”
It’s the first time regulators have formally blocked a mobile-phone transaction, though opposition to a Danish deal forced the companies to ditch the proposal last year. Government demands played a role when Orange SA and Bouygues SA recently ditched a deal to merge their French phone businesses.
The ban may hamper attempts to merge network operators in other countries. Hutchison is currently trying to win EU approval for its 50-50 venture with VimpelCom Ltd. in Italy.
Telecommunications operators want to merge to generate savings and relieve the pressure of cutthroat pricing.

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