The European Commission has launched a 90 working day second phase investigation into the €780m merger between Hutchison and O2 Ireland.
The regulator announced the decision shortly after market close, saying its “initial market investigation…
The European Commission has launched a 90 working day second phase investigation into the €780m merger between Hutchison and O2 Ireland.
The regulator announced the decision shortly after market close, saying its “initial market investigation indicated that the proposed acquisition may substantially lessen competition in the retail mobile telephony market in Ireland.”
The phase II deadline now gives the regulator until 21 March 2014 to reach a verdict.
Hutchison said in a statement that the decision “is not unexpected in the context of previous statements by the Commission that it would take a close look at in-country telecoms mergers”.
Following its first phase investigation, which was launched on 1 October, the EC is concerned that “the transaction would remove an important competitive force and change the merged entity’s incentive to exert significant competitive pressure on the remaining competitors”.
In a statement the regulator added that it was concerned that the transaction would “reduce the merged entity’s incentive to continue a network sharing agreement with Eircom, which could hamper Eircom’s ability to compete effectively after the merger”.
O2 Ireland and Hutchison, which operates under the “Three” brand, would have a combined market share on a par with leading player Vodafone.
The Brussels based agency also expressed worries that a reduction from four to three mobile network owners in Ireland would make it more difficult for MVNOs to find partners willing to host their virtual networks.
Hutchison argues that the merger would be pro-competitive, saying the Irish market has suffered from underinvestment in broadband infrastructure. A combination of the operators would “give Three Ireland the scale necessary to invest more heavily in its network infrastructure and compete more aggressively as the challenger in the market”.
The EC’s decision to open a phase II investigation was not unexpected. In 2012 Hutchison acquired Orange Austria from France Telecom, which resulted in a similar reduction from four to three competitors in a market. The EC cleared the Austrian merger after a lengthy review, but Hutchison was required to agree to substantial remedies to get the green light.
