Comreg raises concerns about O2 takeover by Hutchison Whampa

Communications regulator Comreg has raised concerns about the proposed takeover of O2 Ireland by Three's parent company Hutchison Whampoa.

The European Commission earlier cleared the deal, subject to a number of conditions, paving the way for the creation of the second biggest telecoms provider in the State.

The case is seen as an important test-case for the European telecoms sector.

Hong-Kong based Hutchison Whampoa, which owns Three, agreed last year to pay €850 million to Spanish telecoms company Telefonica for its O2 Ireland subsidiary.

The deal will bring the number of mobile operators operating in Ireland down from four to three - Vodafone, Meteor and O2/3, which will have about 40 per cent of the market share. Vodafone will still remain the largest provider following the merger.

In a notice on the agreement, issued today, Comreg said, however, it remains concerned that the European Commission’s competition concerns will not be fully addressed and that “ significant negative consequences for Irish consumer welfare may result”.

The regulator said the agreed measures appeared “inadequate and ineffective to address the serious competition concerns and consumer harm identified” by the Commission, and did not appear to comply with the its own requirements .

As part of the deal, Three is to allow another company - believed to be UPC - to become a mobile virtual network operator (MVNO) offering services over Hutchison's network.

While the European Commission, which has been undertaking an in-depth review of the takeover since November, cleared the deal today, it won't give final authorisation until Three signs the contract with the new provider. The creation of a new rival will "create competitive pressure" EU Competition Commissioner Joaquin Almunia said.

In a statement today, the European Commission said that it had been concerned that the merger, as initially envisaged, “would have removed an important competitive force from the Irish mobile telecommunications market to the detriment of consumers.” Noting that Ireland is a relatively small market, it said it was concerned that the merger, in its original form, would have led to higher prices and less competition. However, Competition commissioner Joaquin Almunia said the commitments made by Hutchison would ensure Irish consumers continue to enjoy the benefits of “healthy competition” in the mobile telecoms markets.

Hutchison Whampoa is owned by Chinese billionaire Li Ka-shing. The company has been trying to increase its presence in European markets

The European Union exercises strong powers as regards competition law, and is obliged to assess mergers and acquisitions involving companies with a turnover above certain thresholds.

The O2 -Hutchison deal will be one of the final transactions to be approved by the current European Commission which is in the final stretch of its five-year term.