(MENAFN- Gulf Times) Li Ka-shing is no stranger to sparring with Europe's regulators and as he prepares to merge two of Britain's biggest mobile operators, he may have to make significant concessions.
When Spain's Telefonica SA combined its German unit with E- Plus last year, it offered to sell as much as 30% of its network capacity to get a deal past Brussels. Some lawyers and analysts say Li's Hutchison Whampoa could need something similar to win approval for merging its British unit Three with Telefonica's O2.
The £10.25bn ($15bn) acquisition would create the biggest UK wireless provider, cutting competition from four big mobile carriers to three.
"The blueprint is Germany and Ireland and both countries went from four to three operators," said Emanuela Lecchi, a lawyer at Watson, Farley & Williams LLP in London. "It's likely that similar concessions will be made" in the Three-O2 deal.
As well as Telefonica's German merger, the European Union has imposed remedies on Hutchison tie-ups with mobile carriers in Ireland and Austria. The EU forced it to cede wireless spectrum in Austria and offer network access in both countries to so-called mobile virtual network operators € which resell services to their own customers.
Even after concessions, Austria's telecommunications regulator complained that consumer prices went up subsequently, while Ireland's said the EU remedies were insufficient.
Britain's Ofcom will want to make sure such problems don't happen in the UK, analysts said, although it cedes the lead role on mergers to antitrust agencies.
"Ofcom has worked hard to maintain the UK as a four-player market and would have significant reservations," Kester Mann, an analyst at CCS Insight, wrote in a note yesterday, adding that the European Commission is likely to make the final judgment. "Having agreed to a similar deal in Germany last year, it may have set a precedent that could see the deal receive the green light, albeit with significant concessions," Mann said.
The Telefonica purchase of E-Plus in Germany is probably the model regulators will follow if they approve the Three-O2 combination, Macquarie Research analyst Guy Peddy said in an interview. That takeover created Germany's largest mobile operator by customers.
Hutchison believes the deal's approval will rest with Brussels, with an expected closing date of mid-2016, finance director Frank Sixt said yesterday. A European Commission spokesman declined to comment, as did Ofcom and the UK Competition and Market Authority.
"The concern will be that you're effectively losing Three as a maverick," said Lecchi, who added that the UK could seek to examine the deal instead of the EU, alongside a review of BT Group Plc's acquisition of wireless operator EE. Competition from Hutchison-owned Three has pushed bigger operators to cut fees and offer better data access in the UK, Lecchi said.
The UK's 83mn mobile customers paid about £15.63 a month on average for a mobile subscription in 2013, 49 pence lower than the year before, according to the latest market report from Ofcom. That compares to average monthly bills of about $70 in the US, according to GSMA Intelligence.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.