EU General Court tears up ban on Three slurping O2. Good thing the latter's not set to merge with Virgin Media, eh?

Oh wait

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You can file this one under: "Better late than never." The General Court of the European Union has annulled an earlier European Commission ruling blocking a merger between O2 and Three on competition grounds, following an appeal from the latter.

The initial prohibition from 11 May 2016 was on the grounds that reducing the UK cellular market to just three wholesale vendors (Vodafone, EE, and the combined Three and O2 entity) would have stifled competition, thereby harming pricing and quality for consumers.

If the proposed merger concluded, O2 and Three would possess 40 per cent of the mobile market, with EE and Vodafone both sharing the remaining 60 per cent.

The commission also argued that, because the combined entity would be party to both network sharing arrangements between the UK carriers (Mobile Broadband Network Limited and Beacon), it would have knowledge of the infrastructure plans of its two remaining competitors, giving it an unfair advantage.

In overturning this, the General Court today argued that the original decision was "vitiated by several errors of law and assessment".

"Although the Commission established that Three and O2 are relatively close competitors in some of the segments of a market, that factor alone is not sufficient to prove the elimination of the important competitive constraints," it said.

Of course, it's a bit of a moot point. Earlier this month, O2 formally announced plans to merge with Virgin Media.

This deal, should it conclude, would result in the creation of a behemoth with strong mobile, fixed-line, and paid TV elements. It's also far less likely to attract regulatory scrutiny than Three's abortive merger with O2, due to the differing nature of these businesses.

In a statement, Three parent CK Hutchison Holdings Limited welcomed today's ruling, although it lamented the fact that the commission's approach had stifled "vital industry consolidation". This, it argued, would have produced "significant new investment, innovation and benefits for European consumers and industry".

"In our appeal, we argued that the Commission's approach to reviewing the proposed merger, and European telecoms mergers more broadly, was guided by a misconceived default view that European telecoms markets are better served by having a minimum of four Mobile Network Operators in each EU Member State," CK Hutchison said.

"This approach ignores market realities, the clear evidence of successful market consolidation in Europe and across the world as well as the very significant efficiencies in terms of increased investment, network improvements and consumer benefits that can be achieved from mobile mergers."

The firm noted that the commission will have to "fundamentally revisit" its approach to future merger reviews.

While the good ship HMS O2 has since sailed, CK Hutchison will inevitably be emboldened when it comes to future mergers in mainland Europe, where it owns networks in Austria, Denmark, Ireland, Sweden, and Italy. ®


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