Mega merger between Three and O2 blocked amid price rise concerns

An in-depth investigation by the European Commission (EC) led to the scrapping of Three's proposed purchase of O2 amid concerns consumers would have less choice and that this would trigger increased prices.

Hutchison Whampoa – owner of Three – originally agreed to pay £10.25 billion to buy O2.

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Why has the EC put the kibosh on the deal?

Between them, Three and O2 supply 33 million customers with mobile services, meaning a combined business would have a 40% share of a market in which its only competitors would be Vodafone and EE.

Communications regulator Ofcom and the Competition and Markets Authority (CMA) raised concerns last year about the negative impact this would have on mobile customers and the EC has now backed up those fears by stepping in to block the deal.

Margrethe Vestager, in charge of competition policy at the EC, says: "Allowing Hutchison to take over 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."

A CMA spokesperson adds: "It was our view that this merger could cause long-term damage to the UK mobile phone market unless acceptable commitments were offered. Hutchison did not offer acceptable commitments."

What was the proposed deal?

In March 2015, European phone operator Telefonica revealed that after weeks of talks it had reached an agreement to sell its British arm, O2, to Hutchison Whampoa for £10.25 billion.

The sale was expected to complete in the first half of 2016. Hutchison Whampoa stated that at the time the deal was agreed it was too early to say whether things would change for customers once the proposed sale had been completed.

How has Hutchison Whampoa responded to the EC's decision?

Hutchison Whampoa says: "We strongly believe that the merger would have brought major benefits to the UK, not only by unlocking £10 billion of private sector investment in the UK's digital infrastructure but also by addressing the country's coverage issues, enhancing network capacity, speeds and price competition for consumers and businesses across the country, and dealing with the competition issues arising from the current significant imbalance in spectrum ownership between the UK's [mobile network operators]."