Takeover of O2 by 3 approved
The takeover by telecoms service provider “3” owned by the Hong Kong company Hutchison of “O2” has been approved by the European Commission.
This will reduce the number of network operators in Ireland to three, giving the new merged “3” 37% of market share, behind Vodafone at 40%.
The new company must however sign up two virtual operators that between them will take 30% of the capacity of the new entity.
One virtual operator agreement must be signed before the deal is formally agreed by Brussels and it is understood that negotiations are well advanced.
The new company must also offer to share the network with Eircom to allow the former national operator to increase the territory their service covers. Eircom currently has 20% of the market.
O2 is owned by Spain’s Telefónica and the purchase price, first announced last June, was €780m. Both services will be merged with the deal is completed.
Announcing the decision, Competition Commissioner Almunia said Hutchison, the most recent arrival in Ireland, was very aggressive and created a lot of pressure in the market.
They expected that by having them sign up two virtual networks this would create increased competitive pressure. Virtual networks are those that lease capacity without having their own infrastructure such as Tesco, and sell it directly to consumers.
The Commission did not include the virtual network condition when approving a merger in Austria, which Mr Almunia said was a mistake.
However he said the price increase in Austria that followed was not because of the merger but because of the high €2bn auction price for spectrum.
Such high prices were because national governments wanted to make money from them.
Member states had resisted even moderate proposals to remove some of the barriers to an EU single market in telecoms, he said, because they need to get money for their budgets.
He rejected the argument that companies must not face so much competition to allow them make sufficient money to invest in infrastructure.
“I have heard this also, and also the opposite argument. Investment and conditions to develop this sector are not mainly conditioned by the price. We need a Europe wide market to increase the efficiencies”, he said.
