O2 takeover led to higher prices: Watchdog

By Seán McCárthaigh

Consumers faced mobile phone charge increases of up to 20% as a direct result of the acquisition of O2 Ireland by Three four years ago, a report by the representative body of EU telecom regulators has found.

ComReg, the Irish telecom regulator, said the study shows that the acquisition by Three’s parent company, Hutchison, of the Spanish telecom giant Telefonica — which owned O2 — had resulted in price increases which would not have occurred without the merger of the two companies.

The report showed all types of users experienced price increases for the six months after the merger, with the effect lasting 18 months for high-level users.

The report examined the price implications of the merger for three different types of mobile phone users based on their use of voice calls, text messages and data in three countries — Ireland, Austria, and Germany.

“In particular, prices for medium and high mobile users are estimated to be over 20% higher in the first half of 2015 than they would have been had the merger not occurred,” ComReg said.

The study found the concentration of mobile phone operators has led to price increases in the short to medium term in all three countries.

The European Commission approved the merger of Hutchison and Telefonica in 2014, despite concerns from rival operators that it would distort competition. The €850m deal by the Hong Kong-based telecom group reduced the number of mobile network operators in Ireland from four to three.

As a result, Three moved from being the smallest operator in the Irish market to the second largest in terms of revenue and subscribers.

The merger was approved subject to commitments made by Hutchison in response to concerns raised by the European Commission including the offering to Eircom (now Eir) of the continuation of an existing network sharing agreement on improved terms as well as providing access to Three’s network to two mobile virtual network operators in return for fixed payments.

Hutchison also agreed to divest some of its spectrum rights to one of the mobile virtual network operators if they produced a credible business plan to become a full network operator themselves.

ComReg said the objective of the EC’s insisting on the commitments was to eliminate competition concerns even though the Irish regulator claimed they were largely inadequate and ineffective to address fears of harm for consumers.

At the time ComReg said it remained “of the strong view that the behavioural commitments are insufficient to address the structural competition deficit identified as likely to arise from the proposed acquisition.”

The report said the impact of the commitments was small as ID Mobile, the first mobile virtual network operator to enter the market in August 2015 as a result of the Hutchison’s offer, had ceased operating this April.

ComReg said it believed the concerns expressed by the European Commission at the time of the merger “remain valid”.

The Irish regulator said it would continue to monitor competition in the mobile phone market and would look at the release of spectrum in order to promote competition and innovation.

ComReg said it would also raise public awareness of its price comparison tool as a means of lowering barriers to switching provider.

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