EU will veto O2 mobile deal

mobileEU competition regulators are likely to reject a move by CK Hutchison to buy the UK telco o2 from Telefonica.

CK Hutchison wanted to write a $14.9 billion cheque to buy O2 UK from Spanish group Telefonica to become Britain’s biggest mobile network operator. But the EU is worried that the deal would reduce the number of rival mobile network operators in Britain to three.

It will be the first time that European Competition Commissioner Margrethe Vestager has rejected such a deal, although she has hinted at it in the past. Scandinavian groups Teliasonera and Telenor abandoned plans to merge their Danish mobile subsidiaries in September last year after Vestager said she wanted four network operators in that market.

The European Commission will this week seek the approval from national competition regulators for its decision to reject the Hutchison deal. Such a move is usually a rubber stamp. The EU watchdog has set a May 19 deadline for its decision.

A package of concessions designed to boost smaller rivals failed to address the Commission’s belief that the merger could lead to less competition and higher prices in the UK.

Hutchison will be hoping that the Commission will not come to a similar conclusion in its investigation into its proposed merger in Italy of 3 Italia with Vimpelcom’s Wind. However it should not hold its breath. It involves reducing national market rivalry to just three network operators.