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Ofcom chief executive says Three's acquisition of O2 UK should be blocked

Last week, BT, the UK's largest provider of broadband and fixed-line telephony, completed its acquisition of EE, the country's biggest mobile network, in a £12.5 billion deal, creating a 'quad-play' company that also includes a major TV platform. But a second proposed merger in the UK's hotly-contested mobile market may not go ahead, due to concerns that it may have a negative impact on competition.

Last January, Three UK - part of Hong Kong's Hutchison Whampoa group - confirmed that it was in exclusive talks with Spanish telecoms giant Telefónica to acquire its O2 UK operations. In March, the two companies agreed terms for the £10.25 billion deal, but it still has to get the green light from industry regulators.

Today, the head of the UK's telecommunications regulator detailed her position on the proposed merger. Ofcom chief executive Sharon White said in the Financial Times that the deal should be blocked by the European Commission, on the grounds that combining two of the UK's four largest networks would reduce competition, and may result in higher mobile bills for consumers and businesses.

According to Ofcom research, comparing bills in 25 countries over several years, the average monthly bill was up to 20% lower in markets with four strong mobile networks competing for customers, versus those with only three major carriers.

If Three's acquisition of O2 UK were to be approved, it would create a 'super-carrier' with more customers than any other British network - around 40% of UK mobile connections.

White said that she had already communicated Ofcom's concerns over the deal to the European Commission, which will soon be detailing its 'statement of objections' to Telefónica and Hutchison Whampoa. The two companies will then be expected to present potential options to address those concerns before regulators eventually deliver a final ruling on whether or not the deal can go ahead, subject to any revisions that are agreed upon.

Source: Financial Times

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