BT-EE deal approval by CMA could be 'extremely damaging' says trade association

CMA hasn't fully taken into account market consolidation with the Three-O2 deal looming, argues ITSPA

The Competition and Markets Authority's (CMA) decision to unconditionally approve BT's takeover of EE could be "extremely damaging", according to ITSPA, the UK's trade association for VoIP and new communication services.

Eli Katz, the chair of ITSPA, said that the organisation had hoped that the CMA would have considered potential wholesale mobile remedies in its final report, particularly as the panel had expressed differing opinions in its provisional report around the merger's effect on the wholesale mobile market.

Instead, the CMA approved the merger unconditionally, without offering any remedies. In a statement, ITSPA said members believed that despite the claims of mobile operators, there is a highly restrictive wholesale market that hampers the ability for new entrants to compete in the market.

They say that current market trends show access for mobile virtual network operators (MVNOs) to mobile operators' networks is declining, thereby restricting their ability to compete.

In the CMA's provisional findings report, its panel was split on whether the BT-EE deal would lead to a significant lessening of competition in the market for wholesale mobile access. But the final report found that there would not be any substantial lessening of competition, paving the way for BT to complete its £12.5bn acquisition of the UK's largest mobile network.

John Wotton, the CMA's inquiry chair said that the merger wouldn't have a significant effect in terms of competition in either the retail mobile services market or in the supply of services, such as backhaul, wholesale mobile or wholesale broadband services.

"A combined BT-EE would not have both the ability and the incentive to disadvantage competitors such that there would be significant harm to competition," he argued.

However, Katz added that the acquisition must be taken into context with the wider market consolidation that is taking place, particularly the proposed deal that would see Hutchison Whampoa, owner of Three, buy O2 from Telefonica. This will make it the biggest mobile network in the UK, overtaking BT-EE in the process, and reduce the number of major players from four to just three.

"This would be extremely damaging because, as [Ofcom chief] Sharon White pointed out last year, there is already substantial evidence in other European markets to suggest price rises when the number of mobile operators in a national network decreases from four to three operators," she said.

If the Three-O2 deal is approved by the European Commission, it will essentially reduce competition to just BT, Three and Vodafone.

"The wholesale mobile access market in the UK must be reviewed and effective remedies agreed before any merger between O2 and Three can be considered. We would urge the European Commission to consider these recommendations in its current inquiry," Katz said.