Niel meets Vestager to discuss UK entry

Xavier Niel, founder of French challenger Iliad, has reportedly met with European competition commissioner Margrethe Vestager to discuss launching his Free mobile brand in the UK. Vestager has expressed her preference for structural remedies when addressing competition concerns brought about by telecoms M&A.

Xavier Niel, founder of French challenger Iliad (EPA:ILD), has reportedly met with European competition commissioner Margrethe Vestager to discuss launching his Free mobile brand in the UK.

Free would use network capacity which Three and O2 would be required to free up to persuade the European Commission (EC) to approve their planned merger, The Times reported.

Iliad, which drove down mobile prices in France through aggressive discounting, has previously held talks with Three owner Hong Kong-based CK Hutchison (SEHK:0013) about acquiring some of its spectrum, but failed to reach an agreement, the report stated.

News that Niel (pictured) is looking at entering the UK market, through the remedies package Three and O2 may be required to offer, emerged in late January. He would reportedly seek to take advantage of any infrastructure divestments the combined entity would have to make to get the deal past Vestager, who forced Nordic operators TeliaSonera and Telenor to abandon a planned mobile JV in Denmark last September.

Vestager has expressed her preference for structural remedies when addressing competition concerns brought about by telecoms M&A. This represents a retreat from the more liberal approach taken by her predecessor Joaquín Almunia, whose remedy requirements had focused on concessions for MVNOs.

The EC began a Phase II review of Hutchison’s £10.3bn (US$15bn) bid to buy O2 from Telefónica (MAD:TEF) and combine it with its subsidiary Three in late October last year. Its provisional deadline to review the transaction, which would reduce the number of MNOs in the local market from four to three, is 22 April. Hutchison and Telefónica have said they expect to close their UK merger in mid-2016.

The commission has said one of its major concerns about the deal is that it could “remove an important competitive force” in the local mobile market.

As such, the EC has reportedly urged Hutchison to create a fourth mobile network in the UK as a remedy. Hutchison has reportedly offered concessions which include allocating about 30% of the capacity of the combined operators’ mobile network to rivals and selling its 50% stake in Tesco Mobile to Tesco.  

In mid-March, Hutchison said it was considering an alternative plan to get the planned merger over the line which could see it sell a stake in its local unit Three to a new investor and keep the two mobile operators separate.

Last May, Hutchison said it had agreed to sell an approximate 32.98% stake in Three-O2 for £3.1bn to five institutional investors. These agreements are subject to the main deal completion.