$19BN BT-EE Network Merger Gets Provisional Green Light From U.K. Competition Watchdog

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The U.K. competition watchdog has given a provisional green light to the $19 billion acquisition of mobile carrier EE by incumbent telco BT.

The acquisition was announced back in February. While the merger will reduce the number of network operators in the U.K. market, the Competition and Markets Authority’s view is that the two businesses have “limited overlap” in their respective categories of service — noting that BT is strong in fixed comms services, while EE is strong in mobile services.

“After looking in detail at different markets — including the supply of retail mobile, wholesale mobile, mobile backhaul, wholesale broadband and retail fixed broadband services — the group has provisionally decided that the merger is not expected to result in a substantial lessening of competition in any market in the UK,” the CMA said today.

The CMA did have concerns about one area it reviewed — the wholesale mobile market — however officials were evenly divided over whether the concerns indicated a substantial lessening of competition (SLC); not enough of a majority to trigger a finding of SLC.

The CMA’s decision on the acquisition is not yet final, with a further period of consultation in which it will consider responses to its provisional findings. Its final decision is now due in January, with the CMA extending the deadline for its final report by eight weeks to allow for more time to consider responses.

Another ongoing piece of consolidation in the U.K. mobile market is the Hutchison/Three-O2 acquisition. That deal also has yet to be cleared by competition regulators, and earlier this month the CMA made a request to the European Commission to refer the deal to it for review — citing concerns that merger will “significantly” affect competition in the U.K.’s mobile market.

The CMA’s concerns around the Three-O2 acquisition focus on the fact it will reduce the number of U.K. mobile carriers from four to three, with a resulting risk of reduced competition for mobile consumers and the potential for price rises. Whereas the “limited overlap” in the business categories of BT and EE has meant fewer competition concerns from the watchdog.

However, the CMA’s provisional findings in the latter case are based on a consideration of a U.K. mobile market with four players in it. So the signals for green lighting the Three-O2 deal appear less favorable at this stage.

“We provisionally think that the retail mobile market in the UK, with 4 main mobile providers and a substantial number of smaller operators, is competitive,” said the BT-EE Inquiry Chair John Wotton in a statement. “As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect on competition. By the same token, it is unlikely that the merger will have a significant effect on competition in the retail broadband market, where EE is only a minor player.”

The U.K.’s telecoms regulator, Ofcom, is separately considering whether BT should be forced to spin off its wholesale broadband business, Openreach, as part of a separate digital review of the U.K. market — due to published in January.

On Openreach, the CMA said: “We have only considered Openreach to the extent it is relevant to issues arising from the merger. We are aware of concerns voiced recently about Openreach and wider concerns are currently being considered by Ofcom in their review of the whole telecommunications market.”