Li Ka-shing

Hutchison Whampoa

Hong Kong’s CK Hutchison vows to freeze mobile tariffs and invest in UK to win approval of O2 acquisition

PUBLISHED : Thursday, 04 February, 2016, 6:36pm
UPDATED : Tuesday, 03 July, 2018, 8:57pm

CK Hutchison Holdings, which runs the telecommunications enterprises of billionaire Li Ka-shing, vowed to freeze its mobile tariffs in Britain and invest GBP5 billion in all its businesses in the country over the next five years as part of efforts to get its proposed acquisition of O2 UK approved by regulators.

Those guarantees were made by CK Hutchison group co-managing director Canning Fok Kin-ning in a letter published in London on Thursday, following moves by British telecoms regulator Ofcom to block the planned merger between O2 and Three UK.

The Hong Kong-listed conglomerate agreed in March last year to buy O2 from Spanish parent Telefonica for GBP10.25 billion and combine its operations with Three UK to form Britain’s biggest mobile network operator, with almost 33 million total subscribers.

That blockbuster deal, however, has encountered stiff resistance from regulators. Ofcom chief executive Sharon White urged the European Commission to oppose CK Hutchison’s takeover of O2, warning of higher mobile charges in a letter published by the Financial Times on January 31.

EU regulators, which launched an investigation into the proposed O2 acquisition in October, are reportedly set to announce their decision on the deal by April 22.

“Readers in Britain must have been bemused by the blizzard of commentary and speculation earlier this week around telecoms competition,” said Fok, also the chairman at Three UK.

“We might be forgiven for wondering why Sharon White ... felt the pressing need to go public with her conclusions about the effects of CK Hutchison’s proposed acquisition of O2 without having asked for or heard our views in response to her concerns.”

He pointed out that the merger with O2 would establish a mobile network operator that can “stand up to the new Leviathan BT ... not to mention the old top-of-the-heap predator Vodafone”.

Britain’s Competition and Markets Authority last month gave the go-ahead to BT’s GBP12.5 billion purchase of EE, the incumbent largest mobile network operator in the country.

“Over the last 12 years our group spent billions to enable Three to be a major competitive force in UK mobile,” Fok said.

“From the outset, we have followed the principle that as technology improves people should always get more and pay less for their mobile services.”

So he promised that the combined Three-O2 business “will not raise the price for consumers of a voice minute, a text or a megabyte in the five years following the merger”.

CK Hutchison’s proposed investment of GBP5 billion in its businesses in Britain over the next five years represented at least 20 per cent more than what Three and O2 would invest on their own.

In addition, Fok said the combined Three and O2 operation will offer for sale “fractional shared ownership interests in our network capacity” to competitors in Britain.

“Over the coming weeks the promises I have laid out will be an important part of the case Three will put to Europe’s competition authorities,” he said.

An IDC report has said that there are likely to be strong “pro-competitive conditions” attached to the approval of the O2 takeover.

Those conditions have typically included divesting some spectrum — the radio frequency bands over which mobile network services are provided — and strengthening the position of so-called mobile virtual network operators.

The O2 deal represents Li’s biggest overseas acquisition, surpassing the GBP5.77 billion paid by the former Cheung Kong Infrastructure to take over UK Power Networks in October 2010.

CK Hutchison’s “3 Group Europe” telecommunications operations — comprising Italy, Britain, Sweden, Denmark, Austria and Ireland — had about 25 million subscribers at the end of 2014.