The European Commission has blocked Three’s proposed £10bn takeover of O2, citing “strong concerns” that UK mobile customers would have had less choice and paid higher prices as a result of the acquisition.
The EC’s decision, announced on Wednesday (11 May), also concluded that the deal would have harmed innovation in the mobile sector.
The announcement follows an in-depth investigation by the Commission of the deal, which would have combined Telefónica UK’s O2 and Hutchison’s Three, to create a new market leader in the UK mobile market.
However, the EC said a takeover would have removed an important competitor, leaving only two mobile network operators, Vodafone and BT’s EE, to challenge the merged entity.
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The “significantly reduced competition” in the market would have “likely resulted” in higher prices for mobile services in the UK and less choice for consumers than without the deal, the EC said.
The Commission also said that the remedies proposed by Hutchison “failed to adequately address the serious concerns” raised by the takeover.
The deal will be particularly badly received by Three and O2 given Orange and T-Mobile were given the green-light to merge in 2010 to form EE – the current market leader.
Hutchison said it is now considering legal action over the decision.
“We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality,” said Commissioner Margrethe Vestager.
“The goal of EC merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses.
“Allowing Hutchison to takeover O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector. We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal.
“It would also have hampered innovation and the development of network infrastructure in the UK, which is a serious concern especially for fast moving markets. The remedies offered by Hutchison were not sufficient to prevent this.”
