EU blocks Three's O2 takeover: Industry reaction

Following the news that the European Commission has blocked Three's £10.5 billion takeover of Telefonica's O2, various industry professionals have offered their thoughts and analysis.

John Colley, Professor of Practice in the Strategy and International Business group, Warwick Business School:

"It comes as little surprise that the EU competition authorities have said enough is enough on the rapid concentration of the UK mobile telecoms sector. Following the merger of T-Mobile with Orange, subsequently purchased by BT, the industry was reduced to four players. The proposed merger of Three with O2 would have made it three players and the evidence from markets elsewhere shows that three players results in higher prices for consumers compared to four. In effect competition reduces and the consumer pays the price for that.

"It is clear that the merger would have substantially reduced costs in requiring less shops, marketing, administration, head offices and there would have been benefits in terms of reduced network operating costs. However, the reduced competition would have meant that Three/O2 would not have to pass those savings on to the consumer."

Jonathan Bell, VP Marketing at OpenCloud:

"This decision follows Ofcom’s recommendation to Brussels that the merger could result in higher prices for consumers and business, disruption to the existing UK network arrangement, and a “shift in the balance of power” between operators and independent retailers.

“Later this summer, we’re expecting a similar decision from Brussels about the proposed merger of Hutchinson’s 3 Italia with VimpelCom Ltd.’s Wind Group in Italy. The European Commission is sending a clear message that such acquisition and market consolidation will not be allowed if it means reducing competition to less than four major players.

“Instead of relying on acquisitions, operators must work to better service their customers themselves. Consumers can expect to benefit from better network speed and coverage in the short term, but it is difficult to turn these into long-term differentiators. Operators will need to invest in the creation of unique value-added services for their business and consumer subscribers. This is a sustainable route to enhanced customer satisfaction and loyalty, as well as incremental revenue.”

Alastair Masson, Client Partner, NTT DATA UK:

"A combined O2 and Three represented an opportunity to restore some balance to the market at a time when BT’s influence has never been stronger. We, as a sector, lost that opportunity today. The EU’s decision is a short-sighted one that fails to take into account the wider needs of the marketplace. Namely, a viable competitor of comparable scale, as well as the need to maintain customer choice.

"The sector needs a free market entity big enough to keep BT in check. Moreover, it needs a competitor capable of facing BT across several consumer and business-facing activities including mobile, fixed line and broadband.

"With Three’s acquisition of O2 shelved pending legal appeals, there is now a significant chance a counterbidder will emerge. Either from one of O2’s existing MVNO customers looking to protect their position, or an overseas entrant that could use O2 as a platform for rapid UK and European expansion."

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