Whitehall hits out at Brussels over Three-O2 merger

The European probe of Three’s takeover of O2 was heavily criticised by the UK’s competition watchdog on Monday, with the Competition and Markets Authority claiming the deal could threaten choice and competitiveness in Britain’s mobile market.

Hong Kong-listed CK Hutchison, which owns Three, reached an agreement to pay Madrid-listed Telefonica £10.25bn for O2 last year.

The proposal sparked an investigation by the European Commission, which released a list of objections hundreds of pages long.

Whitehall had wanted to investigate the merger itself, and on Monday the CMA wrote a letter saying Brussels’ objections fell “well short” of what is required to prevent harming choice and competition in the United Kingdom.

Both the EC and the CMA have focused their concern on the fact the deal would leave Britain with just three network operators - Three-O2, EE and Vodafone. In a separate Ofcom study, it was suggested that prices in markets with three operators are between 10% and 20% higher.

“The proposed remedies are materially deficient as they will not lead to the creation of a fourth mobile network operator capable of competing effectively and in the long term,” said CMA chief executive Alex Chisholm in the letter to the EC.

He proposed forcing a merged Three-O2 group to divest some of its network infrastructure and radio spectrum so that a fourth network could be set up, maintaining a certain level of competition.