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French maverick sniffs around O2

Ooh la la! Sex shops, Le Monde and a mobe network

European Commissioner Margrethe Vestager is expected to block Three UK owner CK Hutchison’s takeover of O2 this week, leaving BT as the dominant player in the UK’s mobile market.

BT, lest you forgot, is also the monopoly wholesaler of broadband, and the single largest retail provider of broadband too, with a 31 per cent share.

Hutch’s acquisition of O2 from Telefonica and a subsequent merging with Three would have created the biggest mobile network in the UK, bigger than EE. But Brussels, and the UK’s Ofcom, objected to the four major networks becoming three. Instead of two huge rivals (EE and O2/3, and one smaller rival (Vodafone), we’ll have one giant (EE) and three “pygmies”, say critics.

Fearing BT's increasing dominance across so many telecoms markets, traditional foes have put rivalry aside to urge regulators to allow the merger, hoping it can be a strong counterweight to BT.

“The British mobile market could also suffer if the deal is blocked, given the potential to leave two “lame duck” operators with reluctant owners,” the FT noted last month.

O2 boss Ronan Dunne compared the UK to Venezuela. Only in the blighted socialist republic does the former state telco enjoy such a dominant position, he reckons:

“We did an analysis of all the countries Telefonica operates in and the only one that compares for spectrum dominance is Venezuela. Ofcom have simply not considered the counter-factual of what happens if we continue with four operators. BT just gets stronger,” Dunne fumed.

Now The Sunday Times reports that the French operator Illiad SA may be sniffing around O2 should the EU, as expected, torpedo Hutch’s acquisition. Illiad owns the Free ISP and mobile network.

Illiad’s tycoon owner, Xavier Niel, once wrote programs for the Sinclair ZX81, operated a chain of sex shops, and launched France’s first ISP in 1993. He now co-owns Le Monde and is starting an academy for programmers called "42". In 2004 Niel received a fine and a suspended sentence for embezzling cash from the sex shops he co-owned. ®

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