Hutchison's O2 deal may involve spectrum trading with mobile rivals
Operators expected to engage in private spectrum trading to allay regulatory concerns over merger
Hutchison Whampoa's blockbuster bid to buy British mobile network operator O2 will not only see the Hong Kong conglomerate add minority investors to the deal, but could entail its participation in spectrum trading to appease regulatory concerns.
The negotiations, announced last Friday, had Hutchison agreeing to a purchase price of as much as £10.25 billion (HK$120 billion), representing the biggest overseas acquisition by Asia's richest man Li Ka-shing.
Analysts expect the proposed merger between Hutchison subsidiary Three UK and O2, which is owned by Spanish telecommunications giant Telefonica, to face sharp scrutiny from the European Commission as the combination will create Britain's largest mobile operator by subscribers and reduce market competition to three players from four.
"The commission has followed a relatively steady pattern when it has previously looked at four-to-three mobile telecoms deals, involving a long, in-depth investigation, hearing from third parties and several national regulators, and working to solve concerns over retail price rises, accumulation of too much radio spectrum in contiguous high-speed frequency bands, wholesale mobile network access and coordinated effects," said Francesco Liberatore, a London-based associate at international law firm Jones Day.
"The commission will need to look at this case on its own merits considering particular features of the UK market, but it wouldn't be surprising if the parties had to address concerns over spectrum and beef up the terms on which they offer network access to other operators."
A potential reallocation of spectrum - the radio frequency bands over which mobile network services are provided - may be the focus of the review, based on the potential combination of Three and O2 assets.
Besides cornering about 35 million total subscribers, Three and O2's merger would result in the biggest concentration of 800-megahertz, 900MHz, 1.8-gigahertz and 2.1GHz spectrum assets in a single operator in Britain.