O2 takeover decision paves way for more EU telecoms consolidation

As the European Commission yesterday cleared the takeover of O2 Ireland by Hutchison Whampoa subject to a number of conditions, the way was paved for the creation of the second biggest telecoms provider in the State.

The case, which was closely watched by the influential telecoms lobby in Brussels, could set the stage for further consolidation in the European telecoms sector, something strongly advocated by telecoms firms as they struggle with falling revenue.

In particular, the deal is being viewed as a potential test case ahead of the commission's impending decision on Telefonica Germany's €8.6 billion bid for Dutch firm KPN's German subsidiary E-Plus. It is also likely to mark one of the final antitrust decisions by EU competition commissioner Joaquín Almunia, whose five-year stint at the helm of one of the commission's most important divisions ends this year, though Almunia said yesterday he was likely to rule on Telefonica's larger German merger before July.

Competitive pressure In Brussels

the Spanish commissioner said he was confident Hutchison’s remedy package allayed competition concerns, arguing that the creation of a new rival would “create competitive pressure” in Ireland.

Under the deal, Hutchison has committed to allowing another provider – believed to be UPC – to become a mobile virtual network operator offering services over Hutchison's network.

Yesterday the commission, which has been undertaking an in-depth review of the case since November, said it had been concerned that as initially envisaged the merger “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, the commission expressed concerns that the merger, in its original form, would have led to higher prices and less competition. However, Hutchison’s commitments would ensure Irish consumers continued to enjoy the benefits of “healthy competition” in the mobile telecoms markets, Mr Almunia said.

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 a market share about 40 per cent.

The newly merged entity will be the second largest provider in the country, behind Vodafone.

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