EC stops Three acquiring O2 from Telefonica, Hutchinson mulls legal challenge

Hutchinson said it may challenge the European Commission's decision on Wednesday to block its subsidiary Three's proposed acquisition of UK mobile network O2 from Telefonica.

The EC made its decision due to "strong concerns that UK mobile customers would have had less choice and paid higher prices as a result of the takeover, and that the deal would have harmed innovation in the mobile sector".

Hutchison responded in a statement that it "will study the commission’s decision in detail and will be considering our options, including the possibility of a legal challenge", amid reports that other potential buyers are emerging.

The £10.25bn deal would have created a new UK market leader and left only two other mobile network operators, Vodafone and BT’s Everything Everywhere (EE), while the Commission felt the remedies proposed by Hutchison failed to allay its concerns.

The takeover, which was also opposed by UK regulator Ofcom head Sharon White, who has been advising the commission on its decision, would likely have had a negative impact on quality of service for UK consumers by hampering the development of mobile network infrastructure in the UK, the EC said, as well as reducing the number of networks willing to host other providers on their network.

"We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality," said competition commissioner Margrethe Vestager.

"Allowing Hutchison to takeover O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector. We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal.

"It would also have hampered innovation and the development of network infrastructure in the UK, which is a serious concern especially for fast moving markets."

Three had offered numerous concessions to try and smooth the wheels of the deal, including a pledge to plough £5bn of investment into the UK over the next five years, as well as keeping prices flat for that period, together with a recent promise of £3bn in network deals with competitors.

Ofcom head White had warned that a merger of Three and O2 would control "more than four in 10 mobile connections" in the UK.

Reports on Tuesday suggested Virgin Media owner Liberty Global was interested in a potential acquisition.

Liberty chief executive Mike Fries told investors: “We look at all options in the marketplace and it would be strange if we didn’t evaluate that option.”