Ofcom boosts BT’s EE takeover bid; sees Hutch/O2 deal as potential stumbling block

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BT’s proposed £12.5 billion takeover of EE received a boost from UK watchdog Ofcom after the regulator submitted a report to the Competition and Markets Authority (CMA) supporting the merger.
Ofcom, which does not have direct authority to approve the deal, advised the competition authority that concerns raised by rivals over the combined entities’ power did not merit intervention.

Within the 69 page submission, Ofcom further highlighted its own powers to deal with BT’s EE-log-Nov-2014potential dominance, as it seeks to combine its broadband business with EE, UK’s largest mobile player.

“We believe the current and future proposed regulation that we apply to BT will limit BT’s ability to discriminate over price, quality and innovation in the provision of leased lines,” Ofcom said.

Mobile rivals in the UK have claimed they will struggle to meet capacity demands as a result of the deal, and there are further fears over the large share of mobile airwaves a combined BT and EE will have at their disposal.

Ofcom dismissed the concerns, stating “that even though the addition of BT’s spectrum may increase the peak speeds BT/EE could offer, on its own EE is already able to provide higher peak speeds than other MNOs”.

“For potential advantages in terms of WiFi hotspots, access to backhaul and opportunities for cross selling and bundling, we do not consider these are sufficient to create competition concerns.”

In the fixed space, rivals including Sky and TalkTalk claim the combined entity would be able to undercut its services, limit the market’s MVNO options and impact backhaul supply.

“We recognise that, as a vertically integrated firm, BT may have the incentive to discriminate in favour of its downstream divisions, and we impose regulation to address such concerns,” added Ofcom.

Ofcom said last month it was seeking views on whether BT and its Openreach networking division should be separated “to deliver competition or wider benefits to the end user”.

Hutch/O2
Ofcom also drew on Hutchison’s proposed merger with O2 within the report, which could prove to be a stumbling block

The proposed deal is set to be scrutinised by European regulators and Ofcom said “the importance of BT as an independent competitor could depend on the outcome of the proposed Hutchison, O2 merger”.

If Hutchison’s deal to acquire O2 goes through, It would serve to reduce the UK market to three players, adding weight to the argument to keep EE and BT separate, as BT already operates in the mobile space.

Source: Mobile Word Live-Kavit Majithia

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About Tim Cosgrove

Tim Cosgrove heads two technology companies Co-Star and Cloud-Star who supply 4G LTE connectivuty products to the ICT industry globally and are based at Harrogate in the UK. Working at the forefront of the mobile communications industry gives Tim a unique perspective on the latest emerging technologies that help to improve how businesses and people communicate and operate in the future. Tim is keen to share his insights and passion for the latest technologies through the Co-star blog. Please get in touch if you have any technology related news or press releases that you would like us to share.