The UK Competition and Markets Authority (CMA) cleared BT’s acquisition of mobile phone operator EE this morning (15 January 2016), despite strong objections from many organisations in the communications industry. The move follows its provisional decision to clear the merger in October 2015.
The merger of the two organisations combines the UK’s largest mobile phone operator with the country’s largest fixed telecoms and broadband business. In a comment released this morning, Cable.co.uk, the Ofcom-accredited broadband, TV and phone comparator, summarised the industry’s concerns, as follows.
‘The ruling, though expected, arrives in the face of a range of strong objections from around the UK telecoms industry, with the likes of Sky, TalkTalk, O2, Vodafone, Virgin Media and a dozen more having responded to the provisional findings in October last year with similar complaints, including:
• That such a merger will have a negative impact on competition in the UK telecoms marketplace
• That it will provide BT EE with an unequal and unfair percentage ownership of the UK's 3G and 4G mobile spectrum
• That it imbues BT EE too much power to moderate the wholesaling of network capacity to MVNOs (Mobile Virtual Network Operators such as Virgin Mobile who rely on EE's infrastructure).’
The CMA concedes that ‘a range of concerns were raised by other operators and customers in the UK telecoms industry’, but insisted that its ‘assessment has been complex, detailed and rigorous’.
In its statement released this morning (15 January 2016) the CMA stated: ‘After considering in detail responses to the provisional findings, as well as the extensive evidence gathered during the inquiry, the CMA inquiry group has decided that the merger is not expected to result in a substantial lessening of competition (SLC) in any market or markets in the UK, including in relation to the supply of retail mobile, wholesale mobile, mobile backhaul, wholesale broadband and retail broadband services.’
It justifies its stance thus: ‘BT Group plc (BT) and EE Limited (EE) operate largely in separate areas with BT strong in supplying fixed communications services (voice, broadband and pay TV), EE strong in supplying mobile communications services, and limited overlap between them in both categories of service.’
One major area of concern is BT’s dominance in the mobile backhaul, wholesale mobile and broadband markets through its copper and fibre networks. The CMA summarised its position as: ‘BT (including Openreach) also provides many fixed services to other communications providers, including backhaul services to mobile communications providers such as EE, O2, Three and Vodafone. These backhaul services connect radio masts to core networks. EE also provides wholesale mobile services to other mobile service providers such as Virgin Media.
‘The group looked at how the tie-up would affect competition in a number of different areas of the telecoms sector. As well as examining how the merger might affect competition for services to consumers which both companies currently provide, the group has considered whether it might alter the merged company’s incentives to continue to supply services to other communications providers on a wholesale basis.’
John Wotton, CMA Inquiry Chair, said: ‘Since our provisional findings, we have taken extra time to consider responses in detail but the evidence does not show that this merger is likely to cause significant harm to competition or the interests of consumers.’
Wotton added: ‘The retail mobile services market in the UK is competitive, with 4 main mobile providers and a substantial number of smaller operators. As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect. Similarly, EE is only a minor player in retail broadband, so again it is unlikely that the merger will have a significant effect in this market.’
Addressing the concerns over BT Openreach’s dominance, he said: ‘We have also found that in supplying 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 continued: ‘We have heard wider concerns about the sector, including about Openreach and its regulation by Ofcom. Our job has been to examine the specific impact of this merger on competition and consumers and, where relevant, we’ve looked at how these issues might be affected by the merger. There is also an ongoing Ofcom review into the sector and its future regulation, where such concerns may have more relevance.’
Dan Howdle, telecoms expert at consumer mobile and broadband advice site, Cable.co.uk, commented: ‘There can be no doubt as to the power over the UK consumer telecoms market BT EE now wields. Which is precisely why the wider industry has persistently urged the CMA not to rush ahead with this decision, but to take into consideration, and to fully explore their commonly held objections.
‘Sky, for example has been at pains to point out that not only are there – in its opinion – "fundamental flaws" in the economic analysis performed by the CMA, but that the CMA itself contains dissenting members who appear to share the view that the merger will prove a disaster for UK telecoms, and in turn for consumers.
‘The CMA believes the new merged company is, by default, financially incentivised to continue to supply wholesale services to other providers (Virgin Mobile, for example runs on the EE Network), which will prevent it from closing its doors to third-party operators in an attempt to monopolise its own network infrastructure.
‘The greatest concern for its competitors, then, is that, though unlikely – as the CMA points out – no firm measure has been put in place to actively prevent it,’ concluded Howdle.