Mobile mergers, good or bad?
29 January 2015 by Ashton Carter
At the start of December we reported on how BT Group plc were in talks over potentially acquiring EE or O2.
This acquisition was and remains, an attempt by BT to rectify what many people consider to be one of the worst strategic errors in UK history: the spinning-off of O2 (then known as BT Cellnet) in 2002. This effectively led to BT’s exit from the mobile market, with O2 going on to become one of the leading and most profitable mobile providers in the UK – Not one of BT’s finest moments!
Although nothing has been finalised as of yet, BT have since entered into exclusive talks to acquire EE for £12.5bn. By acquiring EE, BT will be able to offer the ‘quadplay’ package which has been so popular in countries such as Spain. This ‘quadplay’ package allows consumers to purchase their landline, mobile, internet and television services in one cost-efficient package.
Some of BT’s rivals, Virgin Media and TalkTalk, have tried to promote similar packages in the past but have been relatively unsuccessful. However, since neither Virgin Media nor TalkTalk have the market share or geographical coverage of BT and EE, perhaps a merger between these two telecommunications giants could potentially grant quadplay the support it needs in order to take off in the UK.
But BT isn’t the only company looking at making an acquisition in the mobile market. After purchasing the Irish operations of O2 last year, mobile operator ‘Three’ are looking at consolidating their position by also acquiring O2’s mobile operations in the UK. Talks between the two companies are very much in the preliminary stages but Three have reportedly made a bid of up to £9bn for O2’s UK operations vehicle.
Notwithstanding the above, even if the two companies do come to an arrangement, it is still possible that Ofcom may interfere in order to prevent the number of mobile service providers in the UK from falling from four to three. Both potential mergers also present possible European Union issues due to their collective market shares, which could theoretically lead to price-fixings and abuses of dominant positions, especially if the number of players in the market is reduced. This reduction in competition would be bad news for consumers who would suffer from paying higher tariffs and a lack of alternatives.
With a very different mobile landscape potentially shaping up in 2015, what are your thoughts? Are you looking forward to being able to ‘quadplay’, or are you dreading a lack of options? Tell us what you think in the comments section.
If you require any advice regarding a corporate acquisition or merger, or are concerned about anti-competitive effects upon a particular market in which you or your business operate, please contact our Corporate and Commercial Department on 01245 584515 or [email protected]
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