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Three Promised to Surpass Coverage Requirement After Acquisition of O2

March 28
7:37 AM 2016

CK Hutchison Holdings promised to fulfill the coverage requirement in the UK if the acquisition of O2 is approved. Office of Communication (Ofcom) of UK has set the target of 90% coverage for mobile operators by 2017.

Three and O2 are the second and fourth largest mobile network operator in UK respectively. If Three takes over O2, they will become the biggest operator with more than 31 million customers. The merger will also reduce the number of mobile network provider in UK into three operators, which currently consist of EE, Vodafone, Three and O2.

European Commission are currently investigating the £10.5 billion ($14.8 billion) merger over competition issue. The commission have concern due to the fact that O2 has a network sharing agreement with Vodafone, and merger with Three will affect the competition. Office of Communication Chief Executive Sharon White has also stated her stance against the deal.

Meanwhile, CK Hutchison and Three have made several promises to alleviate concern from both European and UK regulatory boards. Canning Fok, managing director of CK Hutchinson, the parent company of Three pledged to invest £5 billion ($7 billion) in Britain's mobile industry and freeze prices until 2021. While Three Chief Executive Officer David Dyson said that Three will sell some of its mobile spectrum up to 30%, and the merger will surpass the Ofcomm requirement for UK's operator mobile coverage.

As This is Money reported, CEO Dyson said, "Coverage of 99% is a very significant number. It's in excess of what O2 has today. Putting the two companies together will definitely surpass the target of 90% geographic coverage the Government has set."

Ofcom has set a geographical coverage for UK mobile operator to cover 90% of area by 2017. Three insisted that giving a green light to the merger will surpass the coverage requirement. Meanwhile European Commission still discuss the merger and will announce the decision on May 19.

In an attempt to win approval CK Hutchison said on March 18 to keep the Three and O2 operation separated. In a full-year result presentation, the company said in a statement as quoted by Total Telecom, "Should such [a] new investment proceed, the group will consider implementing a revised business structure that would maintain the continuity and separation of the 3UK and O2 UK businesses."

In the meantime, European Commission is overseeing the case in Austria four years ago, which was almost identical to O2 and Three merger. The Telegraph reported the merger between Three and Orange in Austria prompted a 20% increase in mobile phone bills in the two years following the deal.

CK Hutchison and Three has promised to freeze the price until 2012 and separate the operation to ease the regulator's objection. As European Commission is targeted to announce the decision whether to approve the merger on May 19.

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