Three UK says its 5G plans are under threat if tower merger with Euro giant Cellnex is blocked

According to a filing with Brit competition watchdog


Any attempt to block Cellnex's takeover of Hutchison UK's tower network could see consumers "significantly worse off" and hamper the progress of Three UK's planned £3bn investment in 5G.

What's more, the UK competition watchdog's decision to probe the deal was flawed and based on a "simplistic and misleading" assessment rather than a proper understanding of how real-world markets operate.

The claims were made in legal documents from both companies published on Friday as part of the Competition and Market Authority's (CMA) ongoing investigation into Cellnex's proposed buy of Three UK parent Hutchison's towers and other mobile infrastructure [PDF].

In November 2020, CK Hutchison Holdings, the Hong Kong-based firm that owns UK network Three, confirmed plans to sell its European tower business to Cellnex, the Spain-based operator of wireless telecoms infrastructure.

The Spanish towerco bought British mast outfit Arqiva's telecoms subdivision for £2bn back in October 2019, and manages a portfolio of 53,000 sites across Europe.

The UK watchdog has already pointed out in a previous filing that the Arqiva deal had already made Cellnex the "largest independent supplier of mobile towers in the UK."

The latest Cellnex deal would see Hutchison pocket some €10bn split across cash and stock from flogging its masts and towers in Austria, Denmark, Ireland, Italy, Sweden, and the UK.

To date, all of the Hutchison's cross-Euro deals with Cellnex have been granted regulatory approval – except in the UK, where some 6,000 cell towers are up for grabs.

In July, the CMA confirmed plans to press ahead with a Phase 2 investigation amid concerns regarding the competitiveness of the UK's mobile industry and access to cell tower infrastructure.

At the time, Cellnex hit back saying the deal was "strongly pro-competitive" and would create "firm incentives to unlock, improve and extend mobile coverage, including 5G, across the whole of the UK."

Now, in a joint legal document submitted to the CMA on 2 September but only recently published, lawyers acting for Three and Cellnex said the sale would have "significant consumer benefits and will provide vital funds to support 3UK's £3bn+ 5G network rollout plan."

"UK consumers will be significantly worse off without the Proposed Transaction," the filing claimed.

The pair insist the agreement is "strongly pro-competitive" and "reflects worldwide market trends" where "MNOs (mobile network operators) are divesting their passive infrastructure assets, or outsourcing the management of those assets, to independent wireless infrastructure providers (WIPs)."

They also cited "self-serving comments from 3UK's competitors" for part of the CMA's decision to press ahead with the investigation.

And in an attempt to further undermine concerns that the deal might be anticompetitive, both companies insist it is "pro-competitive" because it "opens an otherwise captive internal tower network to new potential third party customers."

In a swipe at the role the regulator has played, the document said: "In the Parties' [Cellnex and Three's] view, the CMA has fallen into the error – that its own guidelines caution against – of framing the competitive assessment against a simplistic and misleading 'market share' calculation rather than an assessment of how competition in the market actually works and the extent of competitive constraints."

No one from the CMA was available for comment at the time of writing. However, the deadline for this latest round of submission is mid-to-late October. A final decision is expected in January 2022.

Elsewhere, and in a separate rebuttal earlier this month, Facebook challenged its proposed acquisition to buy gif-slinger Giphy, claiming the CMA had applied the "wrong legal test" and that its provisional decision contained "fundamental errors." The deadline for final ruling in that case has been pushed back to December. ®

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