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EU blocks Three's takeover of O2 EU blocks Three's takeover of O2
(35 minutes later)
The European Commission has blocked the sale of O2 to CK Hutchison, the owner of mobile company Three. The European Commission has blocked Telefonica's sale of O2 to CK Hutchison, the owner of Three.
The planned deal was worth £10.3bn, and would have left the UK with just three major mobile phone network operators.The planned deal was worth £10.3bn, and would have left the UK with just three major mobile phone network operators.
But Europe's competition commissioner, Margrethe Vestager, said she had strong concerns about the takeover, ruling that it would reduce customer choice and raise prices.But Europe's competition commissioner, Margrethe Vestager, said she had strong concerns about the takeover, ruling that it would reduce customer choice and raise prices.
CK Hutchison said they were considering a legal challenge to the decision.CK Hutchison said they were considering a legal challenge to the decision.
Concessions not 'sufficient'Concessions not 'sufficient'
"The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses," said Ms Vestager."The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses," said Ms Vestager.
"We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality.""We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality."
The decision ruled that concessions offered by Hong-Kong based Hutchison - including a five year price freeze and billions of pounds in investments - "were not sufficient to prevent" the hampering of innovation and network infrastructure development.The decision ruled that concessions offered by Hong-Kong based Hutchison - including a five year price freeze and billions of pounds in investments - "were not sufficient to prevent" the hampering of innovation and network infrastructure development.
CK Hutchison responded to the decision, saying the acquisition of O2 from Spain's Telefonica would bring "major benefits to the UK not only by unlocking £10bn of private sector investment in the UK's digital infrastructure but also by addressing the country's coverage issues, enhancing network capacity, speeds and price competition for consumers."CK Hutchison responded to the decision, saying the acquisition of O2 from Spain's Telefonica would bring "major benefits to the UK not only by unlocking £10bn of private sector investment in the UK's digital infrastructure but also by addressing the country's coverage issues, enhancing network capacity, speeds and price competition for consumers."
Retail prices for mobile services in the UK are currently amongst the lowest in Europe. O2 said the ruling had little impact on their UK operations. "We work in an industry of constant change and have learnt how to manage that change better than most," said an O2 spokesperson.
The two other major UK operators are Vodafone and BT's Everything Everywhere, known as EE, and the four major operators have paired off to share the costs of developing Britain's 4G infrastructure. "Regardless of what happens next, we will continue to deliver for our customers as we always have."
Potential global interest
Meanwhile Liberty Global - the owner of Virgin Media - has said it would not rule out an acquisition of O2 if CK Hutchison's bid was ultimately unsuccessful.
"It would be strange if we didn't evaluate that option," chief executive Mike Fries told analysts on a recent results conference call.
Kester Mann, a mobile operators analyst, at CCS Insight said non-UK buyers of O2 like Japan's Softbank or Mexico's America Movil were also plausible, but that the "most likely eventual outcome" was a sale to a private equity firm.
"The collapse of the deal leaves both Three and O2 in a precarious position with uncertain futures in the UK," Mr Mann said.
Retail prices for mobile services in the UK are currently amongst the lowest in Europe. The two other major UK operators are Vodafone and BT's Everything Everywhere, known as EE.
The four major operators have paired off to share the costs of developing Britain's 4G infrastructure.
Unlike the main mobile operators, Virgin acts as a so-called "virtual operator" by paying wholesale prices to use the network infrastructure owned by BT's EE. Owner Liberty Global recently ended negotiations for a major tie-up with Vodafone, and settled simply for a Netherlands joint venture.