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Telecom Buyout Thwarted by European Union

Telecom Buyout Thwarted by European Union

A planned move to merge two major telecom companies was curbed Wednesday as the EU ignored promises of price caps and increased investment to prevent the multi-billion pound deal.

London, England, July 12, 2016 — The Hong Kong based CK Hutchison, who own substantial holdings in concerns across a number of sectors, offered to take over the Spanish giant Telefonica’s O2 operation in the U.K. for over 10 billion pounds. The plan was to merge it with their own “Three” service to create the U.K.’s largest single mobile carrier. However, the European Union explained in their report last week that the merger would result in raised prices for the end user together with shrinking package variety.

“In the end we were seriously concerned that mobile consumers would find themselves in a position where they are paying more money for a package that doesn’t even suit their personal requirements, had this merger gone through,” said EU Competition Commissioner Margrethe Vestager in statement. “The proposed deal may have also resulted in stifling of innovation and a reduction in the positive development of mobile technology infrastructure in the U.K.” he added.

Less Carriers

Richard Sharpe, Co-Head of Global Mergers & Acquisitions at Acom Tokyo Securities commented on the news “It’s disconcerting for the bigger telecom firms all across Europe. This ban will set a precedent across the continent and rather than have less carriers it looks like there will be more competition. There were still hopes up until recently that the two companies and the European commission could come to some kind of an agreement but obviously with the announcement on Wednesday we can conclude this is not the case”.

CK Hutchison Holdings Ltd, formed in March 2015 through the merger of Cheung Kong Holdings and its main subsidiary Hutchison Whampoa, said that mergers such as this were required in order to make continued investment into new networks.

“We are convinced that the deal could have been very positive for the telecom sector in the U.K. not only by increasing network capacity and providing savings for customers, but also by raising much needed capital to move forward with new developments” the company said in a press meeting after the E.U. announcement was made.

The E.U.’s data, however, did not agree with the outlook. It said that the merger would have led to price gains across the operator board and would have “handicapped smaller companies”.

Watershed Ruling

This represents the first instance that E.U. regulators have officially halted a mobile-operator deal, though a case in Denmark recently saw an agreement thwarted by leverage and sheer opposition as the two companies were forced to abandon a merger last year.

Haruki Kasumi
Acom Tokyo Securities Ltd
Tokyo, Japan

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