... and the article written by Sharon White:
A UK mobile merger that threatens healthy competition
A combined Three/O2 would shift balance of power between networks and retailers, writes Sharon White
Source:
https://next.ft.com/content/be8d03c8...f-8231cd71622e
Quote:
“What would Herbert Hoover, the pioneering US president who excelled at engineering and economics, make of today’s digital society? He would surely be impressed by the range of affordable devices we use each day, from smartphones to tablets. But I do not think he would be surprised by the economic forces that brought all this about.
Competition is the lifeblood of today’s telecoms market, spurring innovation, better coverage and fair prices. As President Hoover observed: “Competition is not only the basis of protection to the consumer, but is the incentive to progress.”
To see that happening today, take the UK mobile phones sector, where four networks compete for customers. Consumers have enjoyed innovative services and pricing in recent years, from unlimited internet data to free overseas calls. UK prices are among the lowest in Europe, with the cost of a typical package falling by two-thirds since 2003.
Ofcom, the UK communications regulator, aims to maintain that progress through competition. So we are concerned that the smallest mobile network, Three proposes to become the biggest by acquiring its rival, O2. The combined group would control more than four in 10 mobile connections.
This follows a pattern of mobile mergers in Austria, Ireland and Germany. Like those countries, the UK would be left with just three networks. Some argue that operators must consolidate in order to boost revenues, increase efficiency and widen their scale to invest.
But this is not a broken market. Last year, UK mobile companies generated £15bn of revenue. They have been investing billions to roll out 4G technology, while maintaining cash flow margins above 12 per cent. Competition, not consolidation, has driven investment.
We have put those arguments to the European Commission, which is reviewing Three and O2’s proposals, and outlined particular concerns.
First, the deal could mean higher prices for consumers and businesses. To date, Three’s owner Hutchison has often acted as a “disruptive” operator, successfully challenging established players through innovation and low prices.
We are analysing mobile prices over recent years in 25 countries. Our findings show that average prices are around 10-20 per cent lower in markets with four operators and a disruptive player than in those with only three established networks. Austria’s regulator says that, since the deal there, overall mobile prices have climbed 15 per cent and by 30 per cent for customers who only make calls and send texts.
Second, the UK’s networks would face disruption. Recently, the four operators have combined their cables and masts into two networks — one used by Three and EE, the other by O2 and Vodafone.
This works well: the four companies are still effective retail competitors, who compete independently on coverage and quality. Any merger would threaten that arrangement.
A third concern lies on the high street. Most phone contracts are still sold in shops, with independents taking a big share. A combined Three/O2 would shift the balance of power between mobile networks and the independent retailers who help constrain the price of mobile handsets and bills.
Many of our concerns relate to competition between operators who own the networks on which mobile phones rely. Only these four companies can make your mobile signal faster, more reliable and widely available. Establishing a new mobile network might be one answer, but this would take time, and considerable investment.
While the merger is reviewed, Ofcom will keep working to promote healthy rivalry between operators. We want UK consumers and businesses to enjoy fair mobile prices and cutting-edge products for years to come. For that, we need strong competition: the basis of protection and the incentive to progress.
The writer is the chief executive of Ofcom”
