Last year the telecoms giants Three and O2 agreed a company merger of around £10bn. But today, the regulator, Ofcom, has warned that this merger could damage competition and choice. So could this impact you?
It’s coming up to the end of my mobile phone contract and whilst my phone has lasted quite well, the contract terms haven’t been quite the right fit for me – my signal can be patchy, I don’t use those text messages I’ve paid for, and I definitely need more data for when I’m out and about.
So to cut it short, I’ll be shopping around for my next phone, where I fully expect to roll out my best haggling tactics. But what if, when weighing up my options, there’s not a lot to choose from, only a handful of networks and not a lot of difference in the contract offers.
Well today, the UK telecoms regulator, Ofcom, has confirmed our concerns that this could be a possibility for our mobile market. A merger of Three and O2, two big players in the mobile market, could reduce choice and competition. The bottom line being that this could be detrimental to you, your mobile service, and your pocket.
Currently, Three is the smallest mobile network in the UK with around 8.8 million customers. It’s a growing company, and is seen as a challenger in the market. With Three’s proposed acquisition of O2 it’s set to become the largest operator in the UK.
The new company would control 40% of mobile connections. It would also cut the number of mobile networks in the UK from five to three – so not an awful lot for you to choose from when you’re shopping around.
Price analysis by Ofcom of 25 countries showed average charges in mobile markets with four competitors were around 10 to 20% lower than in those with just three networks.
Ofcom have also warned that reducing competition in the mobile phone network increases our reliance on fewer companies to continue to develop and improve mobile phone signal and accessibility across the UK.
Keep the market mobile
Last year the Competition and Markets Authority referred the proposed acquisition to the European Commission for analysis. Ofcom have outlined their positioning on this issue, and we reiterate our fears that this merger could have unfair consequences on your service and pocket.
We’ve also written to the European Commission (19 January) to set out our concerns and ask that they look carefully at the claims that consolidation, rather than competition, in the mobile market will drive investment. Should this Three and O2 merger be cleared, it’s essential that we are properly protected from price rises and poor customer service.
Update 11 April 2016: CMA calls for merger block
The Competition and Markets Authority (CMA) has today appealed to the European Commission calling for a block on the proposed merger of O2 and Three. Mirroring our concerns about the proposed merger, the CMA has warned that the deal would be a ‘significant impediment to effective competition’.
Should the merger go ahead, the number of major mobile phone network providers in the UK would be reduced from four to three, evidence shows that fewer players in a market rarely leads to better outcomes for consumers. The deadline for the European Commission to decide on this deal is the 19 May.
Update 11 May 2016: merger blocked
The European Commission has today announced that it has formally blocked Hutchison’s proposed takeover of O2. EU’s antitrust chief Margrethe Vestager said:
‘Allowing Hutchison to take over O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector.’
Alex Neill, our director of policy and campaigns, said in response:
‘It’s right that the European Commission has taken a strong position and acted in the interest of consumers. Telecoms are an essential part of everyday life and this decision, to protect competition and choice, should prevent UK mobile customers losing out.
‘Three and O2 now need to concentrate on tackling low levels of customer satisfaction and improving their service.’
What do you think about the decision to block Three and O2’s merger?