Facing the Consequences

When the European Commission and Office of Fair Trading approved the Orange, T-Mobile UK merger they did so because they had little choice. No new telecoms company had come in for T-Mobile and the other bidders, Vodafone and O2, would have produced an even larger entity. The problem in this rock-and-a-hard-place scenario, however, is they have created a dangerous precedent.

Having gotten used to being the dominant players in the UK, neither O2 nor Vodafone are prepared to take a back seat. To the contrary their bids for T-Mobile UK show expansion is on their minds and now the only viable candidate left is 3... the same 3 that last year merged with Vodafone in Australia. Should Vodafone make a similar move for 3 UK it would leave them with a 33 per cent market share, if O2 beat it to the punch it would grow to 35 per cent making either a credible rival to Everything Everywhere. All of which makes 3 UK incredibly hot property.

The problem is should one or other succeed in a deal for 3 it would further reduce competition, but the EC and OFT could do little to stop it having already given Orange the green light with its deal for the UK arm of T-Mobile. What would a country with just O2, Vodafone and Everything Everywhere (inevitably the Orange / T-Mobile brand will merge) look like? Potentially we'd be just fine.

In South Korea only three major carriers exist (KT, SK Telecom and LG U+) and customers enjoy arguably the world's most highly evolved networks, but it is the exception rather than the rule. The likes of Germany, Spain, Italy, France and the US all have at least four credible players, as do the advanced Nordic countries where carrier numbers are increasing, not decreasing. More worryingly Canada is famously dominated by just three major networks (Rogers, Bell and Telus) and has comically expensive tariffs.

As it stands the UK is one of the most competitive markets in the world so don't panic, then again reducing the number of competitors has rarely done any market a favour. So, as the saying goes, the only certainty is uncertainty because UK telecoms looks set to undergo its largest overhaul to date and I wouldn't expect 3 to hold out long. During this time we'll find newly minted CEOs with beaming smiles all shaking hands and leaping forward to tell us about the benefits their changes will bring. In reality we just hope they don't do any harm...

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