European antitrust launches in-depth probe on Hutchison's $14 Billion offer for Telefonica's 02

By Money Times

Nov 04, 2015 12:48 AM EST

Europe's major antitrust regulator has opened an "in-depth investigation" on Hutchison's $14 billion acquisition of Telefonica UK's O2 operations.

According to The Wall Street Journal, top European Union officials have been warning that mobile-phone mergers in concentrated markets can lead to higher prices and less options for consumers. The EU authorities warned that if Hong Kong tycoon Li Ka-shing's CK Hutchison Holdings would buy O2, it would become the biggest mobile-network company in the UK. It means it would create an imbalance in the competition. O2 is currently the second-biggest mobile operator in Britain, while Hutchison already owns Three UK, which is the fourth largest in the country. Prior to this deal, the bloc's executive arm rejected in September the merger proposal of telecom operators Telenor ASA and Telia Sonera AB's Danish operations.

ABC News reported that the Antitrust Commissioner Margrethe Vestager said, "The investigation we want to ensure that consumers in the U.K. do not pay higher prices or face less choice as a result of this proposed takeover."

In a report by The Register, the Commission is concerned about three major things. First, the merger would take away an important competitor, leading to higher prices and less investments in the industry. Second, it would discourage mobile network operators from hosting mobile virtual network operators, which means it would have less host networks to choose from. Third, the remaining competitors may increase prices on retail and wholesale markets due to the pressure that a giant monopolistic company would bring.

The commission has until March 16, 2016 to conduct the in-depth investigation on the merger and decide whether to approve or reject it. It could also ask Telefonica and Hutchison for concessions to address the major concerns. If the companies wont reach an agreement on how acquisition would abide by the rules, the commission can choose to block it.

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