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Ofcom's head is dead against Three and O2's merger

Brit industry regulator snuggles up to EU mummy

Ofcom chief exec Sharon White has decided to tell everyone what she really thinks about the possible £10.5bn merger between O2 and Three – and it turns out the regulator-in-chief is not a fan.

Hong Kong’s CK Hutchison announced its intention to acquire O2 from Telefónica last year. However, the European Commission has opened an in-depth probe into the deal and will decide whether to grant its permission for the merger by April 22.

Writing in the Financial Times, White said: "[We] are concerned that the smallest mobile network, Three proposes to become the biggest by acquiring its rival, O2. The combined group would control more than four in 10 mobile connections."

Echoing the views of the EU's anti-trust chief, Margrethe Vestager, who is currently reviewing the deal, White claimed competition drives investment. Others have claimed that further consolidation is required to give companies the economies of scale to improve services.

"Last year, UK mobile companies generated £15bn of revenue. They have been investing billions to roll out 4G technology, while maintaining cash flow margins above 12 per cent. Competition, not consolidation, has driven investment," she said.

She said the regulator has put forward those arguments to the European Commission and outlined its concerns. Ofcom is also worried that shrinking the number of mobile operators from four down to three would hike up prices for consumers.

"UK prices are among the lowest in Europe, with the cost of a typical package falling by two-thirds since 2003," White said.

"We are analysing mobile prices over recent years in 25 countries. Our findings show that average prices are around 10-20 per cent lower in markets with four operators and a disruptive player than in those with only three established networks.

Vestager has taken a tough stance on telco mergers, having scuppered a deal in a deal in her native Denmark between Telenor and TeliaSoner. ®

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