Three’s proposed acquisition of O2 opposed by Ofcom

Ofcom opposes Acquisition of O2 by Three mobile - Office Phone Shop

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Could Three’s proposed acquisition of O2 mean higher prices for consumers and businesses?

The deal would take the number of mobile operators in the UK down from four to three. This, Ofcom warn, would affect both the mobile market and high street retailers.

In a recent statement from Ofcom, Sharon White, CEO, wrote, ‘Competition is the lifeblood of today’s telecoms market, spurring innovation, better coverage and fair prices.’ She has urged the EU Commission to block this move in the interest of competition, claiming competition has been a major driver in the UK mobile market, leading to £1.5bn in generated revenue last year. Competition from four operators has ensured UK prices are among the lowest in Europe, with consumers enjoying innovative services and pricing, such as unlimited data and free overseas calls as a result.

Other European countries have only allowed consolidation with the provision of competition from an emerging mobile company and with guaranteed access to the network. Ofcom believes establishing a new mobile network could be one way of evening up the competition and there has been some interest expressed from French operator ‘Free’. However, this would take time and considerable investment.

Ofcom are concerned that UK consumers should continue to enjoy fair mobile prices and cutting-edge products. That comes from strong competition. The regulator claims the proposed acquisition of O2 by Three may cause disruption to the UK’s networks. Recently, the four current operators have combined their cables and masts into two networks – one used by Three and EE, the other by O2 and Vodafone. This has ensured the four companies work well, competing effectively and independently on coverage and quality. These four operators enjoy the economies of scale that come with network sharing and Ofcom believe any merger would threaten that arrangement.

A further concern of Ofcom’s is how a merger of Three and O2 would affect the balance between mobile networks and independent retailers. Currently, independent retailers help constrain the price of mobile handsets and bills and a shift in power could have a dramatic effect on the high street.

Three is the smallest of the four networks. Acquiring O2 would make it the largest, with control of more than four in ten connections.