The European Commission has signalled a tougher line on telecoms mergers, putting it on a collision course with firms who argue they need to consolidate to invest in faster networks.
Hutchison’s planned acquisition of Telefonica’s O2 would make it Britain’s top mobile operator. It already has a UK mobile presence, via its ‘3’ subsidiary, so the deal would cut the number of network operators from four to three, a number which typically raises regulatory alarm bells.
“The commission has concerns that the transaction would remove an important competitive force and that the merged entity would have limited incentives to exercise significant competitive pressure on the remaining competitors,” said the commission yesterday.
The stakes are high for Hutchison, owned by Li Ka-shing. Failure to get EU approval for the deal could put a brake on its expansion and long-term prospects in Europe, credit rating agency Moody’s wrote in a note last month. The company may have to sell parts of the combined entity’s network capacity and frequencies to get regulatory approval.
“We believe the transaction will be good for both competition and consumers in the United Kingdom and are confident that the acquisition will be approved by the Commission,” Hutchison said yesterday.
Competition commissioner Margrethe Vestager has already scuppered a deal between TeliaSonera and Telenor in Denmark.