Sharon White, chief executive of UK regulator Ofcom, gave a further sign of bearishness among regulators in Europe towards consolidation in the mobile industry.
Fixed incumbent BT is in the process of acquiring leading operator EE, while 3 UK and O2 might also tie up, radically reshaping the UK’s telecoms market.
Yet White (pictured) questioned the underlying argument behind such deals. She claimed even while UK operators are investing billions in rolling out 4G, they are maintaining a healthy average cashflow margin in excess of 12 per cent.
“We continue to believe that four operators is a competitive number that has delivered good results for consumers and sustainable returns for companies,” commented White in a speech at the London School of Economics & Political Science.
Even though Ofcom will not rule directly on either UK merger, her comments reflect thinking among regulators.
“I am concerned that the UK could end up with more concentrated markets that lead to higher prices and reduced choice for consumers, without the promised boost to investment and innovation,” said White.
The UK regulator provided evidence to the Competition and Markets Authority (CMA) and the European Commission for both deals but does not have a final veto on either.
She echoed comments last week by EU Competition Commissioner Margrethe Vestager, pointing to research suggesting that a reduction in the number of players from four-to-three in a national mobile market in the EU can lead to higher prices for consumers, but not more investment per subscriber.
BT break up
Meanwhile Vodafone has used a submission to Ofcom to call for BT’s local-networks business, Openreach, to be split off entirely from its parent. BT’s role as a wholesale supplier of broadband services has come under greater scrutiny since its bid for EE.
According to the Financial Times, Vodafone argued that BT generated £6.5 billion in “excessive profits” in the past decade from its Openreach unit overcharging broadband rivals. The operator made its submission as part of Ofcom’s general review into regulation of the telecoms sector (as opposed to specifically the BT-EE deal). Consultation closed today (8 October).
Separately, fixed operator Cityfibre yesterday announced it would be supplying connectivity to Vodafone. There has been concern expressed by some operators at BT’s role as a leading backhaul provider for the mobile industry since its bid for EE. But Vodafone denied to Mobile World Live any link to BT’s EE bid.
“We have always worked with a mix of different suppliers, usually there are no announcements about these agreements. Howwever with CityFibre being AIM listed they felt that the first contract under the existing MSA (master services agreement) warranted a stock market announcement.”
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