O2 and Three merger threatens healthy competition, warns Ofcom

It must decide by 30 October 2016 whether to allow an investigation by the Competition and Markets Authority.

Ofcom has urged European regulators to block Three’s proposed takeover of O2 amidst fears it will lead to sky high mobile bills in the UK.

She added that it could mean higher prices for the public and businesses, disruption to the existing network set-up in the United Kingdom and “a shift in the balance of power” from independent retailers to operators.

The watchdog’s chief executive, Sharon White, wrote in a column for the Financial Times that she was concerned the UK’s smallest mobile network will become the biggest by acquiring its rival.

Meanwhile, following reports last week that French billionaire Xavier Niel could be interested in entering the United Kingdom market, Ofcom head Sharon White is sceptical about the benefits of this as a solution given “many of [the] concerns relate to competition between operators who own the networks on which mobile phones rely”.

“UK prices are among the lowest in Europe, with the cost of a typical package falling by two-thirds since 2003”, White said. Only these four companies can make your mobile signal faster, more reliable and more widely available.

The claims come just a week after Three caused anger among their customers by hiking up phone bills. She first told the FT that the creation of another, fourth network to replace O2 “might be one answer” for some of her concerns, but would take “time and considerable investment”. “Competition, not consolidation, has driven investment”.

“While the merger is reviewed, Ofcom will keep working to promote healthy rivalry between operators”, she said.

“We are analysing mobile prices over recent years in 25 countries. For that, we need strong competition, the basis of protection and the incentive to progress”, said White. “Our findings show that average prices are around 10-20 per cent lower in markets with four operators and a disruptive player than in those with only three established networks”.

Hutchison have said, in defence of themselves, that this move is a bid to stay competitive with the merging of BT and EE.

Customers will end up paying more if Three and O2 go ahead with their planned merger, according to the regulator.