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Hutchison takes legal action against EU over failed O2 & Three merger
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Thine Wonk
31-07-2016
It's not as simple as that, when you have 9M customers the amount you can afford to spend in billions on spectrum is different to when you have 2, 3 times as many. If H3G spent what EE spent they would make a billion + loss and all the shareholders would pull the plug, as usual, missing the point..

The opportunity to merge the two networks would have provided a vital third big competitor who could actually take on Vodafone (again 2nd largest in the world) and BT (former state, incumbant). It isn't all about spectrum either, just basic economics.

This month we've seen an up to 94% increase of out of bundle minutes by Vodafone and a new EE (BT) announcement of average 18% out of bundle price increases from September, that is on top of the RPI increase to contracts which is automatiacally added every year.
jchamier
31-07-2016
Originally Posted by Thine Wonk:
“It's not as simple as that, when you have 9M customers the amount you can afford to spend in billions on spectrum is different to when you have 2, 3 times as many. If H3G spent what EE spent they would make a billion + loss and all the shareholders would pull the plug, as usual, missing the point..”

I think its over 10m customers, unless they've lost over 1m with the recent heavy price increases? T-mobile USA (30m customers) manages to compete against the huge others (100m+ each) by being innovative. Why isn't H3G Ltd?

Quote:
“The opportunity to merge the two networks would have provided a vital third big competitor who could actually take on Vodafone (again 2nd largest in the world) and BT (former state, incumbant). It isn't all about spectrum either, just basic economics.”

It would have made a monster network with something close to 50% of all customers, which would have had immense market power. Then there would have been little incentive to invest either. Equally bad for the consumer.

Quote:
“This month we've seen an up to 94% increase of out of bundle minutes by Vodafone and a new EE (BT) announcement of average 18% out of bundle price increases from September, that is on top of the RPI increase to contracts which is automatiacally added every year.”

I don't know about Vodafone, but I think the EE increase is only for Orange PAYG branded customers, not EE PAYG or Tmobile PAYG branded? No idea about BT mobile.
Thine Wonk
31-07-2016
Originally Posted by jchamier:
“I think its over 10m customers, unless they've lost over 1m with the recent heavy price increases? T-mobile USA (30m customers) manages to compete against the huge others (100m+ each) by being innovative. Why isn't H3G Ltd?



It would have made a monster network with something close to 50% of all customers, which would have had immense market power. Then there would have been little incentive to invest either. Equally bad for the consumer.



I don't know about Vodafone, but I think the EE increase is only for Orange PAYG branded customers, not EE PAYG or Tmobile PAYG branded? No idea about BT mobile.”

It's between 9 & 10M somewhere splitting hairs, the basic point that it's considerably smaller stands.

The US is a totally different market as uses partner carriers and local roaming agreements and all sorts trying to compare the UK market to the UK market is going to be almost impossible, especially as Sprint etc are having to burden all the extra cost of moving from non GSM technology and as T-mobile is such a massive entity and under the umberella of Deutche Telecom.

It would not have been 50%, 38% I think I worked it out to be, certainly no higherthen 44% which in a market of 3 companies isn't actually that big, especially considering the 2 other competitors would have been BT huge, former main UK state landline provider, broadband provider, TV set top box provider, dark fibre owner etc and Vodafone, the 2nd largest phone provider in the world, all the fibre they have from the Cable & Wireless acquisition etc.

I think there would still have been plenty of competition to be had in that market, rather than what we have now, Vodafone and BT both putting up prices now and by significant amounts, on top of their RPI yearly increases as per my previous links.

Foolish to think we're in a better position saying no to the merger than we would have been actually giving Vodafone and BT a run for their money.
lightspeed2398
31-07-2016
Originally Posted by Thine Wonk:
“It's not as simple as that, when you have 9M customers the amount you can afford to spend in billions on spectrum is different to when you have 2, 3 times as many. If H3G spent what EE spent they would make a billion + loss and all the shareholders would pull the plug, as usual, missing the point..

The opportunity to merge the two networks would have provided a vital third big competitor who could actually take on Vodafone (again 2nd largest in the world) and BT (former state, incumbant). It isn't all about spectrum either, just basic economics.

This month we've seen an up to 94% increase of out of bundle minutes by Vodafone and a new EE (BT) announcement of average 18% out of bundle price increases from September, that is on top of the RPI increase to contracts which is automatiacally added every year.”

o2 were the second biggest network in the UK and chose not to invest in spectrum. They could have bought the spectrum and didn't so on that side of things they're to blame. On the 3 side of things they were offered a deal by Ofcom and didn't take it instead choosing to invest in the 1800 from EE and the 5MHz of 800. Both they're own fault. Even if they were to merge they'd firstly have to divulge spectrum and secondly the spectrum auctions on the horizon (2300/3400/700) don't really provide enough spectrum to turn a network around on a reasonable Capex rollout budget.

I also don't think that the merger would provide an effective competitor to EE and Vodafone for a long time because of the fallout the deal would create. Exiting MBNL or Cornerstone, having to divulge the spectrum and then merging to completely networks with very little similarity.
Thine Wonk
31-07-2016
Telefonica were in $50BN of debt and sold virtually everything in Europe.

You literally don't understand the economics and history of why these two made a good match and why the deal should have gone ahead, and why now BT and Vodafone have it easy and are both putting in big price increases and have free rein to do what they want knowing O2 and Three aren't competition.
Thine Wonk
31-07-2016
I didn't visit these forums for months because I got bored of listening to the patter above from the 5 or so members that are so vocal and basically post anti-H3G stuff because of the experience over the One Plan and who seem to not understand the economics involved. "If they just spend multi-billions like EE", "just put 50,000 masts in simple" brigade.
clewsy
31-07-2016
No I understand economics and monopolies vary rarely benefit the consumer.

The blame for the situations of both networks comes down to their management. They need to devise a strategy that is acceptable to resolve this ... Usually that means investment.

You cant blame the regulator for protecting the consumer for the failures of management.
Thine Wonk
31-07-2016
Originally Posted by clewsy:
“No I understand economics and monopolies vary rarely benefit the consumer.

The blame for the situations of both networks comes down to their management. They need to devise a strategy that is acceptable to resolve this ... Usually that means investment.

You cant blame the regulator for protecting the consumer for the failures of management.”

Three invested extremely heavily, but you cannot keep throwing money at the problem. The market was broken as it was not feasible to throw more billions at spectrum and make more losses when the business had only just started making small profits over the last few years.

You're in business to profit, not for charity. Three and O2's merger would have really given BT and Vodafone a run for their money, instead in September EE's prices go up out of bundle (in addition to the RPI yearly increase on contracts) and Vodafone's out of bundle prices go up this month by up to 90%.

There is now already criticism of the regulator for not taking a wider Europe wide approach to looking at market dominance, with the industry saying Europe has lost it's way.

http://www.bbc.co.uk/news/technology-36267740

They failed to consider the strengths of Vodafone being the world's largest telecoms company by revenue, and with access to fibre, they failed to consider that BT was in such a unique situation and that both of those companies needed a strong competitor to keep the market aggressive.

Enjoy your price rises guys and the lack of 5G investment in the coming years as O2 doesn't have the money, Three doesn't have the money or the customer base to fund such big investment and now BT has swallowed EE they'll do what they've done with fixed broadband and be in no rush, especially without a big strong market or serious competition.
Stereo Steve
31-07-2016
Have to agree with you Thine Wonk. The merger would have created a 'third power' with a chance of upsetting the other 2. Spectrum would have been divested and made available to a new upstart.

EE have done amazingly well. Time will tell what happens now BT controls the money taps. Vodafone have done amazingly badly and failed to invest in data technology. O2 also. 3 have tried hard but were always making up the gap. Their 3G network is impressive and they continue to roll out 4G but are hamstrung by lack of low frequency spectrum.

This move is anti-competitive and typical of the EU. It allows the lazy fat cats to rest on their laurels.

Realistically 3 and O2 are never going to be able to have a better network than VOD or EE have the potential for. Not in the short term anyway. Status quo. I expect there were some serious back handers going on in this deal and the consumer has lost out. EE can charge what they like now. Not their fault but it's the truth.

3O2 would have been a very good network, even with a fair chunk of spectrum removed.
jchamier
31-07-2016
Originally Posted by Thine Wonk:
“s T-mobile is such a massive entity and under the umberella of Deutche Telecom.”

And H3G UK are part of CK Hutchison, somewhat bigger that DT I think, and O2 are part of Telefonica SpA whom were for a time (until spanish banks crashed) almost as big as DT.

Sprint's management screwed up, they went with CDMA and had national coverage one rate back in 2000 to 2005 when all the others were fighting. They had a massive advantage, and then went and squandered it all on WiMax - instead of waiting and watching to see. Then when LTE was obvious they invested with ClearWire in more WiMax, which eventually failed. Now they're trying to roll out LTE fast, and having some success.

H3G UK had plenty of opportunity to buy low end spectrum as lightspeed says, just didn't and waited assuming 3G/HSPA+/DC-HSPA would be "good enough" for their bargain basement network.

H3G's problem was a single topic strategy which has now crashed - the "all you can eat" data for very low monthly fee, which had all the 20 somethings signing up whom used it a massive amount. That gave them no money to invest. Some people would say that's a flawed strategy and a new board is needed.

Governments and regulators are not there to protect companies from their own stupid decisions.
jchamier
31-07-2016
Originally Posted by Stereo Steve:
“Have to agree with you Thine Wonk. The merger would have created a 'third power' with a chance of upsetting the other 2. Spectrum would have been divested and made available to a new upstart.”

Well the regulators disagreed; and in my view two companies the size of Three merging would have been okay, but O2 was too large.

Quote:
“EE have done amazingly well.”

I think EE's management, especially Olaf Swantee, whom had a real vision, (see the "signalling the future" publication) documented it. He saw the lack of investment from VO2 and the fact that Three was charging too little, he also realised Orange and T-Mobile were charging too little to invest in the future. (1gb/300mins/300texts for £10?) That approach had to change. He changed it, and reinvented EE after Tom Alexander left.

Quote:
“Time will tell what happens now BT controls the money taps. Vodafone have done amazingly badly and failed to invest in data technology. O2 also. 3 have tried hard but were always making up the gap. Their 3G network is impressive and they continue to roll out 4G but are hamstrung by lack of low frequency spectrum.”

I suspect BT won't want to break something good; as long as the RoI is still happening. Vodafone have done amazingly well in my town from absolute junk (4th network) they are now 2nd behind EE. That doesn't help the south west, but lets hope the additional £2bn they're talking about for the UK solves your area.

Three has done as little as possible to stay in the game, almost as if Mr Canning Fok from CKHutchison is thinking of selling up.

Quote:
“Realistically 3 and O2 are never going to be able to have a better network than VOD or EE have the potential for. Not in the short term anyway. Status quo. I expect there were some serious back handers going on in this deal and the consumer has lost out. EE can charge what they like now. Not their fault but it's the truth.”

If you have evidence of back handers then I'm sure Mrs May's government would take a very dim view. This isn't some tin pot failed state!

3 and O2 decided not to bid for spectrum, but there is more coming (2300mhz for one) and if Three don't buy any of that it will be obvious their strategy is broken.

Quote:
“3O2 would have been a very good network, even with a fair chunk of spectrum removed.”

Ha ha, I suspect with spectrum removed the combined entity would lose many customers.
Stereo Steve
31-07-2016
Originally Posted by jchamier:
“Well the regulators disagreed; and in my view two companies the size of Three merging would have been okay, but O2 was too large.


I think EE's management, especially Olaf Swantee, whom had a real vision, (see the "signalling the future" publication) documented it. He saw the lack of investment from VO2 and the fact that Three was charging too little, he also realised Orange and T-Mobile were charging too little to invest in the future. (1gb/300mins/300texts for £10?) That approach had to change. He changed it, and reinvented EE after Tom Alexander left.


I suspect BT won't want to break something good; as long as the RoI is still happening. Vodafone have done amazingly well in my town from absolute junk (4th network) they are now 2nd behind EE. That doesn't help the south west, but lets hope the additional £2bn they're talking about for the UK solves your area.

Three has done as little as possible to stay in the game, almost as if Mr Canning Fok from CKHutchison is thinking of selling up.


If you have evidence of back handers then I'm sure Mrs May's government would take a very dim view. This isn't some tin pot failed state!

3 and O2 decided not to bid for spectrum, but there is more coming (2300mhz for one) and if Three don't buy any of that it will be obvious their strategy is broken.



Ha ha, I suspect with spectrum removed the combined entity would lose many customers.”

What's the point of 2300? I've got a tin hat by the way. Keep it by the bed. Just in case. EU is dirty and corrupt and we know it. Best off out of it. Junker is a drunkard. As for 3 they are doing OK down here in the SW. 4G1800 seems to be still rolling out and more 800 all the time. Mr Fokking Can can do what he fokking likes. It's all good. VO2 remain a joke down here.
Thine Wonk
31-07-2016
Quite, and the prices are going up not only by RPI but going up considerably as per the 2 examples given (the biggest 2 networks) whilst we'll see less investment I suspect.

This was keeping the big players happy, like BT and the biggest mobile company in the world, Vodafone lobbying the EU. It is actually a terrible decision those 2 can sit back, put up prices, moderate investment and not be pushed by any significant competition at all, they've got exactly what they lobbied for. The consumers will now be in the same position they are for fixed line, lack of investment and 2 companies running things.
Everything Goes
31-07-2016
Its worth remembering Hutchison owned Orange when it started. They had hoped to repeat the same success with Three. They were always going to sell it off at some point after many years of investment. Hutchison have deep pockets unlike troubled Telefonoica. Hutchison will sell it off to someone eventually as will Telefonoica with O2. Both companies will go on with new investors and be able to buy more spectrum. While Hutchison could keep Three and continue investing its not part of their long term strategy.

Realistically there is nothing to panic about. New investors may perhaps seek to market them in different ways.
clewsy
01-08-2016
It's called investment. You invest to make a profit. That is where you business strategy and model comes in. Three made the choice to chase the bottom end of the market and then decided to try and chase the more profitable top end. This clearly impacted on their customer base and effectively the strategy was "charge high prices, for budget service". That won't work and that is Threes fault.

You can't keep forgetting poor management and wanting the customer to suffer for their bottom line. Remember this so called merger would improve the bottom line, so clearly profits would increase and prices rise.

If three want to grow and compete then they need to invest. That is what EE and VF are doing. o2 much the same really in the network improvements, so it's time three started doing the same if it is serious about being a major network.

I get the feeling three just hope someone will hand it then on a plate.
Thine Wonk
01-08-2016
The rubbish spouted is unbelievable, "because Hutchison formally owned Orange that means they were going to sell Three", despite owning many Three networks and purchasing O2 Ireland recently. Where is your evidence for this or is it just DS bullshit? Every business might sell an asset, of course it would still exist for competition purposes, just owned by somebody else, that has absolutely nothing to do with ensuring a healthy market now.

A company that has managed to operate for 13 years in the UK and put in one of the largest investments ever, it still doesn't work at 9 or 10M, not now up against BT (largest UK telecoms company) and Vodafone (world's largest). That isn't a suitable market NOW, not any more for the reasons given. Whatever happened historically doesn't take into account putting the market right now and enabling a healthy market effective competition.

You two are unbelievable, so totally wide of the mark that I am just astonished.
plymouthbloke1974
01-08-2016
Originally Posted by Stereo Steve:
“Have to agree with you Thine Wonk. The merger would have created a 'third power' with a chance of upsetting the other 2. Spectrum would have been divested and made available to a new upstart.

EE have done amazingly well. Time will tell what happens now BT controls the money taps. Vodafone have done amazingly badly and failed to invest in data technology. O2 also. 3 have tried hard but were always making up the gap. Their 3G network is impressive and they continue to roll out 4G but are hamstrung by lack of low frequency spectrum.

This move is anti-competitive and typical of the EU. It allows the lazy fat cats to rest on their laurels.

Realistically 3 and O2 are never going to be able to have a better network than VOD or EE have the potential for. Not in the short term anyway. Status quo. I expect there were some serious back handers going on in this deal and the consumer has lost out. EE can charge what they like now. Not their fault but it's the truth.

3O2 would have been a very good network, even with a fair chunk of spectrum removed.”

BT have recently commited to a multi-billion pound investment over the next three years.
Thine Wonk
01-08-2016
Originally Posted by plymouthbloke1974:
“BT have recently commited to a multi-billion pound investment over the next three years.”

Yes because of the Emergency Service contract which is enabling them to fund that. What about effective competition? What about Vodafone's investment and keeping pricing competitive with the two of them with no big competition?

What the regulator has created is effectively a market of 2, a cartel.
lightspeed2398
01-08-2016
Originally Posted by Thine Wonk:
“Yes because of the Emergency Service contract which is enabling them to fund that. What about effective competition? What about Vodafone's investment and keeping pricing competitive with the two of them with no big competition?

What the regulator has created is effectively a market of 2, a cartel.”

Now you're the one making speculation. The ESN requires the massive network expansion but you've no evidence that EE wouldn't have done that anyway.

Vodafone is investing don't see your point here? Been forced to fairly rapidly because of the 4G competition from the other MNOs and the demand for data? And as much as areas of the country are currently pretty crap on them, they have in Manchester now pretty much every site with 20MHz of bandwidth from 800 & 2100 with 2600 on one or two as well plus their announcement of 2600TDD.

On the last point about pricing considering EE & Vodafone have created this monopoly in your mind could you possibly provide an explanation then for Vodafone's ARPU being negative for the last year or so? Doesn't quite add up with your view of events.
clewsy
01-08-2016
Your opinion of how markets work is bizzare. Using your logic Aldi / Lidi / Poundland / Home Bargains / B&M etc would never have entered the saturated and highly competitive and massive capital intensive UK supermarket and grocery market.

It doesn't matrwr who you are who against. If you believe you have the product / service to offer and attract the customer, you invest. That's what Three need / needed to do.

The problem appears with Three is they are keen to blame anyone but themselves. They are the ones who devise strategy and act it out. If you stop investing you then can't moan when you start going backwards.

That's why o2 are spending vast sums at the moment to invest, when they have not done it in the past.

Punishment of the consumer and removed choice and the ability to hike prices and profits (as three would have done if it was allowed) was hardly the best deal for the customer.
Thine Wonk
01-08-2016
They don't have to compete and pay billions for finite spectrum in advance, I'd have through that was blooming obvious, maybe not. They can also set up branch by branch, they don't have to run a cell tower network of 18,000 cells regardless of customer base. Also last time I checked Tesco didn't manage and operate the underlying distribution network that the other supermarkets must negotiate to access like BT and Vodafone do.

Your 'supermarket' logic is totally flawed and again you're showing how you don't understand the challenges specific to the mobile market - ever thought of applying for a job at the EU?
clewsy
01-08-2016
Many supermarkets do control aspects of the supply chain.

They do own pockets of land that stop development on prime sites.

They do have supplier level agreements and vast E of S.

They do have brand loyalty.

They do operate in established and saturated markets.

Expenditure in all those main players is greater than the mobile market.

So actually its a perfectly valid logic to make the comparison. We're talking about organisations who are small entering a competitive market and growing through a strategy and good management.

The market is more competitive because of all these players. The customer benefits.

However here we have three with poor strategy, poor management and lack of investment - looked to blame anyone other than themselves for the failings.

O2 are investing. VF are investing. EE are investing.

Strangly if three don't invest you go backwards ....oh look that appears to be happening now.

They need to decide on a strategy and stick with it. It appears what worked was the budget market , but they seem to want the premium market at the moment.

They do have
Thine Wonk
01-08-2016
The mobile market is restricted to just a handful of companies, nobody else can enter the market without spectrum, there is also the need to have nationwide overage and cell infrastructure of 15,000+ cells and billion in licensing specrum and the 2 biggest companies (one is the biggest in the world, the 2nd is the biggest in the UK) both own and control the fibre.

You think it's the same as running a supermarket - you are absolutely bonkers I'm afraid, so much so it's impossible to even begin to have a sensible debate. I'm not sure if you're on a windup it's that far of the mark? Are you???
clewsy
01-08-2016
Well Three have the coverage agreement with EE, so that isn't a problem.

They could have had a 4g agreement but didn't want to invest in that. So again we come back to their strategy.

Yes you need bandwidth, but that is effectively like a supermarket needing a building and land to trade from. However again as part of the strategy they know what this entails and they have the chance to bid for more shortly should they wish?

The problems with Three appear to come down to the focus of being a one trick budget pony. They focused so much on 3g (even when others were pushing 4g) but it appeared it was always a case of maximising assets and not investing for the future. Clearly though that is a choice they made and no regulator should be punishing the consumer for the benefit of a poorly run commercial operator.
de525ma
01-08-2016
Originally Posted by Thine Wonk:
“I didn't visit these forums for months because I got bored of listening to the patter above from the 5 or so members that are so vocal and basically post anti-H3G stuff because of the experience over the One Plan and who seem to not understand the economics involved. "If they just spend multi-billions like EE", "just put 50,000 masts in simple" brigade.”

To be honest, you banging the same drum over and over doesn't help either.

Yeah, you disagreed with the decision. You wanted better coverage and now you won't get it, so the EU is terrible and corruption must be the cause. Herp derp EU bad (insert verbatim statement from The Sun here). We get it.
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