EU Blocks Takeover of O2 by Hutchinson | tutor2u Economics

Some hugely important competition policy news. The European Union Competition Commission - which has the power to investigate the competition implications of big mergers and takeovers - has formally blocked the proposed £10bn takeover of O2 by CK Hutchison, the company which operates Three.

Acknowledged source: http://ec.europa.eu/competition/publications/infographics/2016_04_en.pdf

Verdict:

The EU Competition Commission had "strong concerns that UK mobile customers would have had less choice and paid higher prices as a result of the takeover, and that the deal would have harmed innovation in the mobile sector." The takeover would have removed an important competitor, leaving only two mobile network operators, Vodafone and BT’s Everything Everywhere (EE), to challenge the merged entity.

Competition Commissioner Margrethe Vestager, in charge of competition policy, 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. The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses.

Brussels breaks up Hutchison’s O2 move

Market Structure of the UK Mobile Network

  • There UK mobile network is a highly concentrated oligopoly
  • There are currently four mobile network operators in the UK – BT's mobile business EE, Telefónica's O2, Vodafone and Hutchison’s Three.
  • EE and Three have combined their networks as “Mobile Broadband Network Limited” - MBNL. Similarly, Vodafone and O2 combined their networks to set up Beacon. This allows EE / Three, and Vodafone / O2 respectively, to share the costs of rolling out their networks but they continue to compete with each other for retail customers.
  • There is also a number of mobile "virtual" operators active in the UK retail mobile market, such as Virgin Media, Talk Talk and Dixons Carphone's iD. These mobile virtual operators do not own the networks they use to provide mobile services to UK consumers. Instead, they entered agreements with one of the mobile network operators to access their network at wholesale rates.

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