9th Jun 2015 11:00
LONDON (Alliance News) - The Competition and Markets Authority Tuesday said it has fast-tracked BT Group PLC's GBP12.5 billion deal to acquire mobile operator EE Ltd to a so-called phase 2 investigation, which involves a deeper probe of the deal because the UK's antitrust regulator is concerned it will hit competition.
In May, BT asked the CMA to proceed directly towards a phase 2 investigation, knowing the regulator was likely to take that decision anyway. At the time BT reiterated that it thinks the deal will be good for competition, investment and innovation, and said it expects the deal to be completed by the end of March next year.
The CMA said Tuesday it has decided it is appropriate to fast track its investigation to a deeper probe as there is a "realistic prospect of a substantial lessening of competition in relation to the supply of wholesale access and call origination services to mobile virtual network operators and fibre mobile backhaul services to mobile network operators in the UK".
"We have found that there is a real risk that the merger could reduce their incentives to supply these inputs and that this could have a detrimental impact on the retail mobile market," CMA Executive Director of Markets and Mergers Andrea Coscelli said in a statement.
"BT and EE have recognised that the issues in this case are complex and that the test for reference at phase 1 would be met. They therefore requested use of the fast track procedure and, after due consideration, we believe this to be appropriate," Coscelli added.
The UK for a long time had four main mobile operators: Vodafone Group PLC's network, O2, which was owned by Spain's Telefónica SA, Orange, owned by France Telecom, and Deutche Telecom's T-Mobile. Hutchison Whampoa ran the much smaller 3 network, while local retailers and telecom operators ran so-called virtual network operators that utilised the networks of the big four.
However, the market is now consolidating. EE was created by the merger of Orange and T-Mobile in the UK, while Hutchison Whampoa has agreed to acquire 02 UK from Telefónica for GBP10.25 billion. Meanwhile, last Friday Vodafone confirmed it is in talks with US cable company Liberty Global over a potential asset exchange, although it denied speculation that it was in talks for a potential merger with the company.
The consolidation is coming amid a growing push by TV and mobile operators to offer consumers a so-called quad play of TV, broadband, mobile and fixed line services. It also comes as the nature of TV viewing changes, with viewers switching to streaming content over the internet and mobile devices.
BT's deal has come under fire from peers over concerns over competition, with Vodafone Chief Executive Vittorio Colao telling journalists at the time of Vodafone's full year results that the deal needs to be "watched with extreme care" as competition in the UK market needs to remain healthy.
Colao said he was willing to "vocally" address the deal, and suggested that BT and EE would need to release some spectrum, and EE should release Hutchison Whampoa Ltd, which owns the Three network, from their network sharing joint-venture.
At the time of BT's full year results in May Chief Executive Gavin Patterson told journalists that the case BT is making to the CMA is "very strong", and stressed that the combined BT and EE entity would "break the threshold of 40% in any of the key markets." Patterson at that time highlighted that UK telecoms regulator Ofcom has opted to increase its threshold in terms of spectrum coverage next year, which means the company should be "comfortably" under the new threshold.
Shares in BT are trading up 0.2% at 439.45 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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