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Three O2 Deal: Is it a good thing for consumers?

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OPINION: The mobile landscape in the UK is about to drastically shift in the coming weeks and months.

Barely weeks after BT entered advanced talks to buy EE ahead of an expected £12.5 billion deal, O2 is reportedly under the hammer too.

This week reports have suggested both Three and Sky have their sights set on picking up the bubbly network from Spanish giant Telefonica, but Three seems to be in pole position with negotiations now ongoing over a possible deal with up to £10 billion.

If Three’s parent company Huchinson Whampoa makes a huge big splash and gobbles up O2, then Three instantly goes from Four to One. It’ll instantly leapfrog from mobile also-rans to become the UK’s biggest mobile network, from 8 million to 30 million customers. That’s quite the change.

Will it be a good thing or a bad thing for UK mobile customers? Let’s take a look at some of the variables.

What Three does well

Three has gained a lot of traction in recent years as plucky underdogs that are innovative with plans, pricing and customer benefits.

It was the only network to vow not to hike tariffs on 4G contracts and, while rivals love to cap customers’ monthly allowance, Three is the only carrier offering customers all you-can-eat 4G data plans, and at a ridiculously reasonable price too (from £15 a month SIM-only).

The pioneering Feel At Home initiative allows users to travel to 16 different countries and use their normal minutes, texting and data allowance without any extra cost. What a massive and long overdue advantage that is for British travellers and holidaymakers.

Long story short, Three has done a great job of offering British customers unique deals at below market prices.

What it’ll mean for Three and O2 customers

As the number one network, the ball game changes completely. From the plucky underdog, scheming ways to ensnare customers form the big guns; Three will become the top dog.

As a result there would definitely be less pressure on Three to dangle carrots as compelling alternatives to EE, O2 and Voda. For example, would the firm be as inclined to offer those all-you-can-eat data contracts to a combined user base of 30 million people?

However, this deal would see at least one sure-fire boost current Three customers. The network’s 4G service currently trails its rivals’ significantly having only launched in March 2014. It owns the least amount of spectrum, boasts the least amount of coverage and its 4G download speeds are – on average – the slowest among the big four networks.

All of these issues issues would be assisted greatly by the acquisition of O2’s hefty chunk of 800MHz 4G LTE spectrum, currently bringing super-fast mobile data speeds to 41 per cent of the UK.

For O2 customers this deal could also be good news. Would they get the opportunity to move onto Three’s 4G contracts at 3G prices complete with all you can eat data? Or have the opportunity to freely roam around the world using their contract allowance?

When five becomes three…

One worrying element for customers in the United Kingdom would be the diminished choice available should the Three/O2 deal go through in the coming weeks.

As far back as 2009, there were five major networks to choose from. Orange, Vodafone, O2, T-Mobile and Three. Pretty soon it’ll be down to just three options for consumers, if discounting Virtual Mobile Network Operators like Virgin and Tesco Mobile.

Less choice for consumers is hardly ever a good thing. Less competition in the market place means there’s less need for the leading companies to offer compelling price points. Eventually, after some minor price wars, you reach a point where each company is relatively sated with their slice of the pie, lie back and get fat on the proceeds.

For example, do you really think Microsoft and Sony actually care about which of them sells the most Xbox Ones and PS4s in any given month when they’re both cashing in immeasurably on the overhyped console wars? Pull the other one.

As the BBC pointed out in its report on Friday, the consolidation from five to three networks in Australia has seen prices rise overall. Who wants a repeat of that in the UK?

Where does this leave Vodafone?

With EE nestling up to BT and O2 falling into the loving arms of Three, this potentially leaves Vodafone adrift of the new mobile order. It would have a smaller user base and a smaller 4G LTE footprint than either of the new big two.

If O2 does ends up in the hands of Three and the rumoured interest from Sky comes to nothing, I could certainly see the satellite broadcaster and broadband provider coming after Vodafone.

One of the reasons BT is so keen on the EE acquisition would be the ability to offer users quad-play package deals to take care of all of their customers' entertainment and communications needs. For the first time it could offer mobile phone and data contracts, home broadband, home phone and television under one umbrella with one monthly bill.

Sky seemingly has its eye on the same prize, judging by its interest in O2, and failure to acquire a mobile network at this stage would leave it very vulnerable to BT’s march.

Sky and Vodafone would need each other. A mutually beneficial marriage could be swiftly arranged…

So, is this a good or bad thing?

At this stage, it’s difficult to say whether Three’s planned acquisition of O2 is a good thing or a bad thing. We’ve looked at the potential positives for customers of both networks, but history suggests consolidation of ownership and less choice never ends too well for the consumer.

With a larger market share and one of its competitors out of the way, companies sure do have a habit of getting lazy. They get complacent and stop innovating as they’re no longer forced to claw for every customer. Look at Microsoft’s launch this week, for example. Only now is that company discovering its mojo after years of contented dominance left them behind the industries most hungry, forward-thinking companies.

I really like the options Three brings to the UK market as the quirky wildcard of the pack. It keeps the larger plays like EE, Vodafone and O2 on its toes.

Would Three really be so concerned with new and interesting ways to snare customers with 30 million paying customers handing over cash every month? I’m not so sure.

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