The European Union is about to make a pig’s ear out of the quad play war in the UK, with reports out this week that it will block the merger between 3 UK, owned by Hutchinson Whampoa, with Telefonica’s O2. There is every chance that for the first time among operator consolidations in Europe, that someone will reach for their lawyer and this could get very messy.
Similar recent write-ups have said that the UK’s competition regulator, the Competition and Markets Authority, is unhappy and referring the deal upstairs to the European Commission. If the story blows up around the time the UK population goes to the polls in the EU Referendum, it could have dire consequences with the UK concerned that the Commission is interfering unduly in its affairs – something that has perhaps not been thought through.
Bloomberg broke the story, citing two unnamed sources close to EU anti-trust officials, saying that the heart of the matter is that the new merged operator is refusing to sell off capacity to create a new fourth operator in the UK. Germany has managed to go down to three cellular operators very quietly, and the French authorities made it clear that it was in the country’s interests to kill off the “cut to the bone” price war going on in France across its 4 operators, and was more than happy to take its cellular operators to 3, although no deal could be resolved. For some reason the UK is to be deprived of that possibility.
Before British Telecom was given permission to acquire EE in the UK, it threatened privately to bring in a WiFi First cellular strategy to the UK, which would have savaged the profits of all four of the MNOs, in a similar way to Iliad’s Free in France. That’s the leverage that it called upon to get its hands back on a cellular operator, but the country could still fall into that kind of price war, if one of the other players was to use a large WiFi base for offload.
Neither Sky or Virgin have their own cellular network and both need access to one via an MVNO, but re-assurances that the merged 3 and O2 would be their supplier, hence bringing more big brands to the cellphone market, appear to have fallen on deaf ears at the European Commission. UK national newspaper, The Telegraph has suggested that Hutchison is preparing to mount a legal challenge to any EU move to block the takeover.
Hutchinson in the UK has had a terrible time, winning a 3G license and starting a network from scratch, offering cheap voice and data, without access to a GSM network for support. Now Hutchinson is finally, after a 13 year struggle to become viable, about to get its hands on a decent multi spectrum network, it is suddenly being treated like an outsider.