EU crackdown on telecom mergers

by | September 13, 2015 12:40 am



A £10bn deal to create the UK’s biggest mobile operator faced a stiff new challenge yesterday after the EU’s competition watchdog toughened its stance on telecoms mergers.

The threat to Hutchison’s acquisition of O2 from Spain’s Telefónica came after Brussels thwarted a long­touted tie­up between two Danish operators, saying it would push up prices for consumers.

Margrethe Vestager, the EU’s antitrust chief, claimed credit for scuppering the merger, which did not meet her stringent regulatory conditions.

Analysts said the failure of the Danish deal marked a big shift in the European Commission’s stance on phone company tie­ups. It comes after a two­year flurry of dealmaking that has remade Europe’s telecoms industry, with operators buying rivals to increase their pricing power in several national markets.

The shift sets a daunting hurdle for Hong Kong­based Hutchison as it launches the formal process to clear its acquisition of O2.

The group filed the paperwork for the deal yesterday afternoon. The commission is concerned that consumers will pay for industry consolidation through higher prices and reduced competition.

Such concerns forced Telenor and TeliaSonera yesterday to withdraw a merger of their Danish businesses, which would have reduced the number of telecoms groups in Denmark from four to three.

That has implications for the Hutchison­02 deal, which would also cut the number of big operators in the UK market from four to three.

However, Hutchison is expected to argue that the UK is different to Denmark, where the proposed merger of the second and third telecoms groups would have taken the country close to a duopoly.

Shares across the telecoms market fell almost 2 per cent yesterday as investors worried about the impact on the next wave of mergers. Significantly, Ms Vestager said Telenor and TeliaSonera could only have won approval by shedding assets to create a fourth mobile network operator in the country.

Analysts at Citigroup said the Danish case would raise questions over proposed deals awaiting regulatory clearance, as well as potential deals in the future, for example in France.

“It is not clear what remedy offer would have been acceptable to the commission, if any,” Citi said.

“We consequently see this as a toughening of the policy towards in­market mobile consolidation.”

Daniel Thomas

FT