EU antitrust regulators block Hutchison's O2 UK mobile bid

Reuters with

EU antitrust regulators blocked on Wednesday CK Hutchison Holdings' planned 10.3 billion-pound ($14.9 billion) acquisition of O2 from Spain's Telefonica, saying the deal would have led to higher mobile phone prices in Britain.

This is the second telecoms deal scuppered by the European Commission and could stall consolidation in the sector.

Pedestrians pass an O2 mobile phone store, operated by Telefonica SA, in London, U.K.
Chris Ratcliffe | Bloomberg | Getty Images

CK Hutchison defended the proposed merger on Wednesday and said it might mount a legal challenge to the commission's decision.

"We are deeply disappointed by the commission's decision to prohibit the merger between Three UK and O2 UK. We will study the commission's decision in detail and will be considering our options, including the possibility of a legal challenge," it said in a statement emailed to CNBC.

"We strongly believe that the merger would have brought major benefits to the U.K., not only by unlocking £10 billion of private sector investment in the UK's digital infrastructure but also by addressing the country's coverage issues, enhancing network capacity, speeds and price competition for consumers and businesses across the country and dealing with the competition issues arising from the current significant imbalance in spectrum ownership," it added.

European Competition Commissioner Margrethe Vesager said the deal would have hampered innovation and the development of network infrastructure in Britain.

Hutchison, controlled by Asia's richest man Li Ka-shing, had aimed to expand its telecoms footprint in Britain, where it already operates as "Three".

"We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal," Vesager said in a statement on Wednesday.

Hutchison, O2 deal is ‘highly unlikely’: Analyst

Wednesday's decision raises the bar for Hutchison's planned combination in Italy with Vimpelcom, the parent company of Wind, which is the subject of a full-scale EU investigation.

"CKHH will now focus on working with the Commission towards clearance of our proposed merger with Wind and 3 Italia and continue to pursue strategies to bring value to CK Hutchison Group," CK Hutchison said on Wednesday.

Teliasonera and Telenor abandoned plans to merge their Danish mobile subsidiaries in September last year after EU regulators said they wanted four network operators in that market.

The Commission said Hutchison's concessions failed to adequately addressed competition concerns. The company had offered to boost rivals Virgin Media and Tesco Mobile by offering them access to the merged network.

The Commission also rejected the industry's arguments that mergers were necessary to spur investments in data-heavy networks, saying that effective competition instead was the main driver.

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