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By | Kat Hall 11th April 2016 09:12

UK competition watchdog gripes to Brussels about Three-O2 merger

If we can't have four operators, they can't have their deal

Britain's competition regulator has written to Brussels to put the brakes on the proposed £10.25bn merger between Three and O2 unless a fourth mobile operator is proposed.

In a letter to Europe's competition chief Margarethe Vestager, chief executive of the UK's Competition and Markets Authority, Alex Chisholm, reiterated the authority's concern over the deal between Hutchison 3G UK and Telefonica UK.

The plea comes as the commission is tasked with deciding the fate of the merger in by early next month.

"We believe this merger would give rise to a significant impediment to effective competition in retail and wholesale mobile telecoms markets in the United Kingdom," he said.

Chisholm said the current remedies offered "fall well short". Three's parent company, CK Hutchison Holdings, has promised that it will not hike up consumer bills for five years and will plough £5bn of investment into in the UK over that period if regulators give it the go-ahead.

Reports have also suggested the operator has signed £3bn in deals with rivals Virgin and Sky to give them space on the merged network.

However, that is not enough for Blighty's regulator, which said today the proposed remedies "are materially deficient" as they will not lead to the creation of a fourth Mobile Network Operator capable of competing effectively.

Chisholm said: "The only appropriate remedy that would meet the criteria that the Commission is bound to apply... is the divestment – to an appropriate buyer approved by the Commission – of either the Three or O2 mobile network businesses, in entirety, or possibly allowing for limited ‘carve-outs’ from the divested business." ®

He added: "The divestment would need to include the mobile network infrastructure and sufficient spectrum to ensure a commercially viable fourth MNO in the UK. Absent such structural remedies, the only option available to the Commission is prohibition.

"The CMA urges the Commission to act to prevent the long-term damage to the UK mobile telecoms market, and therefore to the interests of UK consumers, that both of our authorities have predicted will result from this merger." ®

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