Ofcom chief urges EU to block Three-O2 merger

Ofcom’s chief executive has urged the European Commission to block the merger of O2 and Three, saying it could lead to higher prices for consumers.

In the Financial Times on Monday, Sharon White laid out her concerns ahead of the commission releasing its first statement on the proposed merger later this week.

CK Hutchison, the parent company of the Three mobile network, agreed in March 2015 to buy O2 UK from Telefonica in a deal worth £9.5bn.

The deal has prompted competition concerns as mobile tariffs in the UK would then be set by just three major networks.

White said in the Financial Times that she’s concerned that Three, which has often acted as a “disruptive” operator, will go from being the smallest operator to the biggest.

She said some argue that operators need to consolidate to increase efficiencies and boost revenues.

“But this is not a broken market,” she said.

“Last year, UK mobile companies generated £15bn of revenue. They have been investing billions to roll out 4G technology, while maintaining cash flow margins above 12 per cent.

“Competition, not consolidation, has driven investment.”

White wrote that Ofcom has found that prices are around 10% to 20% lower in markets with four operators and a disruptive player than in those with only three established networks.

She also said another main concern lies on the high street.

“Most phone contracts are still sold in shops, with independents taking a big share,” she wrote in the Financial Times.

“A combined Three/O2 would shift the balance of power between mobile networks and the independent retailers who help constrain the price of mobile handsets and bills.”

The European Commission is due to issue a list of formal objections to the deal on Tuesday.