UK cable operator Virgin Media’s support for CK Hutchison’s bid for Telefonica O2 UK improves its chance of being approved by regulators.
Tom Mockridge (pictured), chief executive of Virgin Media, wrote in a blog: “Any competition concerns can be addressed without blocking the proposed O2-Three transaction.”
Virgin Media is a major rival to both Hutch’s 3 UK unit as well as Telefonica O2 with its mix of fixed broadband, TV, telephony and MVNO-based mobile service.
“The Commission has previously cleared mobile mergers which resulted in a reduction in the number of mobile operators from four to three, subject to wholesale remedies,” wrote Mockridge.
He referenced two similar deals in Austria and Ireland that reduced the number of mobile operators from four to three in his argument.
“In two cases, Austria and Ireland, Virgin Media’s parent company Liberty Global provides vigorous competition and consumer choice as a result of taking EU remedies.”
“A combined O2-Three could have more to offer consumers and, crucially, more capacity for other providers who want to drive competition in their own right. With the right remedies, this deal could stimulate not curb competition,” he added.
CK Hutchison group co-managing director Canning Fok this week made three guarantees if the O2 takeover goes ahead: Firstly, a merged 3 UK-O2 will not raise prices for five years following the merger. Secondly, that the combined entity will invest £5 billion over the next 5 years.
The third promise is particularly interesting as Fok said 3 UK/O2 will enable “other meaningful competitors” to enter the UK market using its network.
Hutchison will offer for sale “”fractional shared ownership interests in our network capacity” to rivals, said the statement. Clearly, Virgin Media thinks such an arrangement has potential to strengthen its existing mobile service.
Hutchison is thought to have received a statement of objections this week from the EC running into hundreds of pages. Margrethe Vestager, the EU competition chief, is particularly concerned about the threat of higher consumer pricing following any deal, as well as poorer access to wholesale capacity for rivals.
Mockridge’s comments will help Hutchison’s case, at least in terms of the wholesale access debate.