O2-Three UK merger probably should have been allowed

It's come a little late in the day to make a difference to anyone involved, but the recent ruling by the General Court of the European Union to annul the decision to block the merger of O2 and Three in the UK could have implications for future proposed mergers.

Back in 2016, the European Commission (EC) blocked CK Hutchison's proposed £10.3 billion (US$12.6 billion) acquisition of Telefónica UK (O2), which would have created the UK's largest mobile operator by combining it with Hutchison's Three UK unit. At the time, European Competition Commissioner Margrethe Vestager said her team had "strong concerns" that the deal, if approved, would have meant less real choice for UK consumers.

Hutchison brought an action of annulment to the General Court, which has taken until now to rule that the EC was wrong. Indeed, the court found that the EC made errors in how it applied the law and in its assessment of the competitive situation. For example, it said the mere effect of reducing competitive pressure on competitors was not enough to demonstrate competition would have been harmed.

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CK Hutchison has already welcomed the court's ruling, although it has not yet revealed whether it plans to take any further steps. It did say that the commission "will need to fundamentally revisit its approach to merger reviews in this key sector," and noted that this approach "has unfortunately acted as a brake on, or in a number of cases prevented, vital industry consolidation in Europe which would have resulted in significant new investment, innovation and benefits for European consumers and industry."

Telefónica UK has of course already moved on from the failed merger attempt with Three UK. In May 2020, Liberty Global and Telefónica announced plans to merge their UK operations to create a fully "converged" operator to challenge incumbent BT. (See O2 and Virgin Media to merge in £31.4B deal.)

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— Anne Morris, contributing editor, special to Light Reading

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