After the EU’s O2-Three merger decision, five questions for the UK mobile market
Hutchison’s bid for O2 has been turned down in Europe. Here are five questions the UK mobile market is asking today
Continued competition…
Ofcom initially rejected the merger based on evidence that fewer competitors results in less pressure to keep prices down. It’s that same fear which informed today’s decision, despite assurances from Hutchison of a five year price freeze and a significant commitment to investment in infrastructure. Both regulatory bodies will hope today’s decision enables continued healthy competition between the four major players in the UK mobile market, resulting in lower prices for customers.
… or a missed opportunity?
However, there are those who argue that a O2-Three merger – which would have catapulted the operator to the top with a 33 per cent share of the consumer mobile market – would actually have galvanised competition rather than stunted it. A growing MVNO market where smaller players like giffgaff and Tesco Mobile are continuing to gain ground, combined with the stipulations which would have been imposed as part of the deal, would have provided strong incentives for continued competitive pricing. There’s arguably nothing like being overtaken by another network and losing your position as the UK’s largest provider (EE), or being relegated to the nation’s smallest mobile operator (Vodafone) to get operators thinking about how they can tempt new customers with the best deal.
What will Hutchison do next?
Hutchison’s bid for O2 was a clear move to extend its global strategy of expansion through acquisition to the UK, but now the telecoms giant will be focussing on its other proposed merger deal. Hutchison wishes to combine its resources in Italy with similarly sized carrier Wind to better compete against the larger Italian networks.
What about Telefonica?
Telefonica’s chief executive has said that if the deal didn’t go through the company would explore other options, including finding alternative buyers. This might be the ideal solution – and there have been several rumoured buyers in recent days – with Virgin Media, owned by Liberty Global, potentially expressing interest. This would certainly solidify its position as a quad-play provider and provide the ideal launch pad to go toe-to-toe with BT and EE.
How sustainable is the UK mobile market now?
As it becomes increasingly difficult for networks to generate revenue, the significant expenditure needed to accommodate growing data consumption is going to be a bigger burden on all operators. Although elsewhere promises of investment in infrastructure have proved hollow once mergers have taken place, in theory this deal would have left Three in an ideal position to invest. As we stand now, EE under BT’s stewardship is best placed to lead that charge but where does that leave the other networks? Customers are the ones who will suffer if the UK lags behind – the very opposite of what the regulators wanted.