EU says Three can’t buy O2 – explained

The European Commission has given a thumbs-down to Three’s planned purchase of O2.

The attempted takeover by Hutchinson – the owner of Three – would have been worth £10.25 billion, but was formally blocked by the EU in Brussels today after an investigation into how it would affect consumers. The EU says that if the takeover went ahead, mobile customers would have less choice.

Margrethe Vestager, the competition commissioner for Europe, said:

“This transaction would have created a market leader that would have had influence over the entire mobile network infrastructure in the UK. Our investigation has revealed significant competition concerns with this deal. It would very likely have led to higher prices and less choice for UK consumers.”

^{Margrethe Vestager, who heads up the EU’s competition investigations}

According to Vestager, Hong Kong-based Hutchinson’s takeover was blocked to ensure that consumers can “enjoy innovative mobile services at fair prices and high network quality”.

Hutchinson tried to woo the EU with a number of concessions, including freezing prices for five years and loaning mobile masts and network frequencies to rivals like Sky and Virgin Media.

Commenting on the decision, telecoms expert Dan Howdle, of Cable.co.uk, said:

“When EE formed from Orange and T-Mobile in 2010 it reduced the number of network operators in the UK from five to four, a number still regarded by Ofcom and the European Commission as able to provide a competitive enough marketplace to ensure reasonable pricing to UK customers. Unfortunately, research by Ofcom has suggested that a reduction of four network providers to three will potentially send mobile contract prices skyrocketing.”

^{Three is one of the UK’s biggest mobile networks}

Howdle says the block will feel “staggeringly unfair” to O2 and Three after Orange and T-Mobile were allowed to merge six years ago. He also believes that the ruling will prevent future merger attempts by UK network providers.

EE is currently the dominant force in the UK’s mobile market, and the EU’s decision will certainly dampen Three’s attempt to change that.

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Do you think Three should’ve been allowed to buy O2? Let us know in the comments.