Li Ka-shing

High stakes for Hutchison: EU regulators investigating Hong Kong-based company's £10.3 billion bid for British mobile operator O2

PUBLISHED : Friday, 30 October, 2015, 11:24pm
UPDATED : Saturday, 31 October, 2015, 10:16am

EU antitrust regulators have launched a full investigation into Hutchison Whampoa’s 10.3-billion-pound (HK$123.06 billion) bid for British mobile operator O2, concerned that the deal may push up prices.

The European Commission has signalled a tougher line on telecoms mergers, putting it on a collision course with the companies who argue they need to consolidate to invest in faster networks.

Hutchison completes buyout of British mobile carrier O2 for £10.25 billion

Hutchison’s planned acquisition of Telefonica’s O2 would make it the top mobile operator in Britain. It already has a UK mobile business, Three, so the deal would reduce the number of network operators from four to three, a number which typically raises regulatory alarm bells.

"The Commission has concerns that the transaction would remove an important competitive force and that the merged entity would have limited incentives to exercise significant competitive pressure on the remaining competitors," the Commission said on Friday.

The stakes are high for Hutchison, owned by Li Ka-shing. Failure to get EU approval for the deal could put a brake on its expansion and long-term prospects in Europe, credit rating agency Moody’s wrote in a note last month.

The company may have to sell parts of the combined entity’s network capacity and frequencies - or spectrum - to get regulatory approval.

"We believe the transaction will be good for both competition and consumers in the United Kingdom and are confident that the acquisition will be approved by the Commission," Hutchison said on Friday.

Competition Commissioner Margrethe Vestager has already scuppered a deal between TeliaSonera and Telenorin Denmark, casting a cloud over the prospects of a similar deal in Italy between Hutchison and Vimpelcom’s Italian business.

A previous deal cutting the number of national operators from four to three in Austria was approved by Vestager’s predecessor in 2012, and subsequently prompted price increases.

The European Commission said it had 90 working days until March 16, 2016 to reach a decision on the matter.