Hutchison Said to Face EU Antitrust Hurdle Over O2 Deal

  • EU sends statement of objections listing concerns over deal
  • Co.s can still make concessions to allay antitrust issues

CK Hutchison Holdings Ltd. received a statement of objections cataloging European Union concerns over its plans to create the U.K.’s biggest mobile-phone business by combining its Three unit with Telefonica SA’s O2, according to a person familiar with the case.

Billionaire Li Ka-Shing’s Hutchison and Telefonica got the EU filing today, said the person, who asked not to be named because the document isn’t public. The statement details concerns that must be addressed before regulators could approve the 10.5 billion-pound ($15.3 billion) deal that would reduce the number of U.K. operators to three from four.

Canning Fok, Li’s top lieutenant, said in a letter on Feb. 4 that the combined company wouldn’t raise prices for five years if the deal goes through. He also said it would invest 5 billion pounds to strengthen network coverage, reliability and data speeds.

The standoff pits Hong Kong’s richest man, who’s seeking to reorganize his business empire before handing over control to his eldest son, against an authority that is increasingly wary of mergers in the phone industry. TeliaSonera AB and Telenor ASA’s attempt to merge their Danish units collapsed in the face of EU opposition last year.

While companies can counter the EU’s arguments, they more usually seek to placate officials with concessions such as selling units or promising to change their future behavior. Liberty Global Plc won EU approval on Thursday to buy Royal KPN NV’s Belgian mobile-phone business after pledging to aid a new mobile virtual network operator.

Hutchison and the European Commission in Brussels declined to comment on the statement. Telefonica declined to immediately comment.

Price Concerns

The EU said last year that it was concerned that merging two of the U.K.’s four mobile operator would lead to higher prices and less investment in networks. They’ve also expressed concerns that MVNOs -- smaller carriers that buy or lease networks -- would have fewer choices and less power to negotiate favorable terms.

Margrethe Vestager, the EU’s competition chief, has said she’s wary of phone tie-ups that don’t benefit customers. Vestager’s predecessor’s decisions to clear deals in Austria, Ireland and Germany in the last five years attracted criticism from groups, including local regulators, for failing to prevent higher phone bills or to stoke new competition.

Sharon White, the head of the U.K.’s telecommunications regulator Ofcom, has been openly critical of the merger, prompting CK Hutchison’s Fok to write an open letter defending the deal.

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