Ofcom Signals Possible Setback for 02-Three Merger
October 08 2015 - 9:19AM
Dow Jones News
By Rory Gallivan and Razak Musah Baba
LONDON--Consolidation among U.K. mobile telecommunications
companies may not be needed to ensure adequate investment in the
industry, according to the U.K. communications regulator--a
possible setback for the proposed $15 billion merger between O2 and
Three.
Ofcom Chief Executive Sharon White said in a speech at the
London School of Economics on Wednesday that investment in mobile
infrastructure is only likely to suffer when companies can't make
an adequate return because competition is so intense.
"The evidence suggests this is not the situation in the U.K.
mobile market, which last year generated 15 billion pounds ($22.8
billion) of revenue," she said.
Ms. White said the U.K. has benefited "for many years" from the
existence of four or more mobile operators.
The U.K. mobile market is currently dominated by four operators;
Spanish telecoms group Telefonica's U.K. arm O2, Asian conglomerate
Hutchison Whampoa Ltd.'s Three, Vodafone Group PLC (VOD.LN) and
EE.
Hutchison Whampoa in March agreed to pay Telefonica GBP9.25
billion for Three, plus a possible further GBP1 billion if targets
are met.
Ms. White, who said Ofcom will be providing evidence to the
European Commission as it examines the implications of the proposed
merger, said studies suggest reducing the number of players from
four to three "can lead to higher prices for consumers, but not
more investment per subscriber."
She added: "We continue to believe that four operators is a
competitive number that has delivered good results for consumers
and sustainable returns for companies."
Telefonica declined to comment and Three didn't immediately
comment.
(David Roman contributed to this article.)
Write to Rory Gallivan at rory.gallivan@wsj.com; Twitter:
@RoryGallivan
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 08, 2015 09:04 ET (13:04 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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