ComReg concerns over O2 takeover

The takeover of O2 by Three approved by the European Commission could have negative consequences for Irish consumers, ComReg has warned.

Three will go from being the country’s smallest mobile operator to vying with Vodafone for the number one position with the acquisition for a reported €780 million of the Spanish owned Telefónica O2 by Hutchison, the Hong Kong owner of Three.

The European Commission has attached conditions to the takeover but ComReg, the national regulator, said it did not believe these would fully address the competition issues and believed they did not meet the commission’s own requirements.

Competition Commissioner Joaquin Almunia said that all issues surrounding the deal had been “solved and agreed” following an indepth investigation opened in January.

He said the most important condition was Hutchinson’s commitment to sign with a mobile virtual network operator to buy part of the capacity of the merged entity which must be complete before the contract is confirmed.

It is understood that Hutchison is within days of signing such a deal with UPC.

They have to sign up a second mobile operator also, but not in advance of completing the deal. It is understood that they have had initial discussions with a number of potentially interested parties.

The two mobile operators must have 30% of the capacity of the merged entity, purchased for a minimum of five years with the possibility to extend it to 10. This will be done on the basis of a new model of their taking pre-fixed capacity rather than a ‘pay per use’ agreement which, according to Mr Almunia, will give both an incentive to aggressively sell their product.

They will also be able to become a full mobile network operator at a later stage as Hutchison has committed to selling five blocks of spectrum, available for 10 years from January 2016.

A third condition related to Eircom, the former state owned network that has most of its operations in the fixed line market at present but also has 20% of mobile services. Their arrangement with O2 must continue and be extended to allow them to roll out further services in the future and to host mobile virtual networks also.

The new extended Three will also provide them with infrastructure to allow them extend their services nationally and in areas where service is weak at present.

Hutchison is providing the service to Eircom under more attractive conditions than they have at present, the Commission said.

A statement from Three’s chief executive Robert Finnegan said the new merged entity would give them the financial strength to compete more aggressively against Vodafone.