In 2016, following a merger inquiry, the European Commission blocked a proposed merger between o2 and Three UK, largely due to the impact the merger would have in the UK mobile market, by reducing the number of Mobile Network Operators in the UK from four to three, leading to increased prices and worse quality of service for consumers.
This decision was appealed to the European Court of Justice (“ECJ”) by Three UK.
On 28 May 2020, the ECJ published its judgment in the appeal which annulled the Commission’s decision to block the merger on a number of grounds. In particular, the ECJ found that the Commission had failed to meet the relevant standard of proof that in relation to the impact of the proposed merger on prices and quality of service for UK consumers.
The ECJ decision may put an end to the idée reçue that four competitors constitute the minimum number for a competitive market. Following the ECJ’s decision, we may see more four-to-three mergers in the mobile network sphere, as network operators seek consolidation as a way to fund 5G roll out.
That said, the UK’s telecoms regulator, Ofcom, was also vocal at the time of the merger in its opposition to the proposed deal. It may be that such consolidation will continue to be opposed in the UK mobile market, particularly after the end of the Brexit transition period.
Suffice to say network operators can expect any consolidation in the market to continue to be subject to regulatory review.
If you have any questions about the ECJ’s judgment, or mergers in the telecoms sector generally, please contact Tim Cowen.