Vodafone criticises Three-O2 merger terms

Thursday 29 May 2014 18.11
Vodafone will remain the largest network in Ireland even after the merger of Three and O2
Vodafone will remain the largest network in Ireland even after the merger of Three and O2

Vodafone has criticised aspects of the European Commission's decision on the proposed merger between Three and O2, saying it will distort healthy competition and act as a barrier to future investment here.

In a statement, the company says it welcomes consolidation that is fair for market participants and customers, and also stimulates investment in networks and services.

However it says from what it has seen of the European Union's decision, it points in the wrong direction by favouring operators who do not invest in infrastructure over those that do.

It claims this is happening at a time when investors are looking for positive returns on infrastructure investment and as Vodafone is embarking on the largest and fastest investment programme in the company's history.

Responding to Vodafone, Three Ireland's CEO Robert Finnegan said that a complaint from the dominant player in the market showed that EC's decision was "good for competition."

He said Three was not surprised by Vodafone's response and that a strong competitor "must be unsettling" for the firm "after years of unchallenged market dominance".

Competition authorities in the EU yesterday cleared the merger, as long as Hutchison Whampoa met a number of conditions.

These include the sale of up to 30% of the merged company's network capacity to two mobile virtual network operators and the divestment of some spectrum in the future.

Yesterday ComReg expressed concern about the deal, saying its terms to not fully address competition concerns.

In a notice posted to its website, the regulator said that “negative consequences for Irish consumer welfare may result” from the merger.

Responding to ComReg, Three Ireland said that "a market with three strong networks is a lot better than a dysfunctional four player market".

As part of its criticism Vodafone, which is Ireland's largest mobile phone operator, also questioned the plan to create two new virtual operators, which it claims would reverse the benefits of consolidation for investment and sustainable competition.

It says it doubts the option for the virtual operators to take on spectrum and build their own network will ever be exercised, because there is little incentive for this to happen.

As a result, it claims, Hutchinson will retain all its and O2's current spectrum, which it says will distort competition and discourage investment in mobile networks.

Vodafone says it is considering its options under EU and Irish law, and it is urging Comreg to use its powers to ensure all operators receive an efficient allocation of spectrum.

Three's Robert Finnegan said it "does not accept that spectrum disparities will occur" from the move as the two new MVNOs will have access to up to 30% of its capacity.

"Three notes that spectrum disparities were never a concern for Vodafone when it held over twice Three’s spectrum capacity over the past decade,” he said.