Watchdog: BT-EE merger a "real risk" to competition

CMA agrees to fast-track its antitrust investigation into quad-play deal

BT

A watchdog today agreed to fast-track its antritrust probe into BT's proposed 12.5 billion takeover of EE, warning it could harm competition in the UK.

The Competition and Markets Authority (CMA) said there is a "real risk" of the acquisition damaging the rivalry between mobile operators in the UK, and that of fibre operators.

Its decision to move to phase two of its investigation follows BT's original request for the case to be fast-tracked last month, and the CMA admitted third parties have raised "significant competition concerns" with it over the deal.

If BT's acquisition of EE is approved, it will offer a quad-play service comprising pay-TV, landline, mobile and broadband.

Andrea Coscelli, the CMA's executive director of markets and mergers, said: "Together [BT and EE] will have a strong presence in many telecommunications markets.

"They also supply important inputs at the wholesale level, which enable other communications providers to compete at the retail level in the provision of mobile services.

"We have found that there is a real risk that the merger could reduce their incentives to supply these inputs and that this could have a detrimental impact on the retail mobile market."

The CMA added in a statement: "It gives rise to a realistic prospect of a substantial lessening of competition in relation to the supply of wholesale access and call origination services to mobile virtual network operators and fibre mobile backhaul services to mobile network operators in the UK."

Third parties are invited to comment on the takeover during the more in-depth phase two of the investigation, now set to begin following an initial request for comment during phase one.

The next stage will be overseen by a group of independent panel members, said the CMA, and will examine a wide range of issues.

While common in some European countries, BT's quad-play offering would be the first of its kind in the UK.

However, other telcos are following suit, with Three owner, Hutchison, proposing to buy O2 from Telefonica for 10.25 billion.

Vodafone is also understood to be in discussions with Liberty Global over a possible merger, according to The Telegraph.

The CMA's decision to fast-track the proposed acquisition comes after Ofcom decided last month that BT should open up its dark fibre network to rivals.

Such a move would see smaller fibre providers be able to rent leased broadband lines from BT, but use their own equipment, instead of buying compatible hardware from BT, to light' the cables.

This would enable companies renting the lines to create their own tailored, high-capacity data services to compete with BT's.

BT presented its case to the CMA earlier this month, after rumours of the takeover had been circulating for several months. Issues raised by rivals such as Sky, TalkTalk and Vodafone, however, point to the possibility that BT and EE combined would exceed the radio spectrum limit imposed by Ofcom.

To avoid this becoming a barrier, it is expected that BT will give up a portion of its spectrum in order to ensure the deal goes through. More 800MHz frequency could then be bought to improve 4G coverage.

Gavin Patterson, chief executive at BT, told The Guardian: "BT's acquisition of EE will be good for consumers, businesses and UK plc, as well as for BT shareholder, so we are keen to regulatory clearance. A larger BT will be able to invest and innovate even more than now, something that's good for jobs and good for customers."

The fast-tracked approval process has been used before when Thomas Cook and the Co-operative Group merged in 2011, and now BT is hoping that it can push things through in the same way.

This article was originally written on 19/05/15 but has been subsequently updated (most recently on 09/06/15) to reflect the latest developments in the story

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