Hutchison Said to Counter EU in Crunch Talks Over O2 Deal

  • EU price increase prediction well below German, Irish tie-ups
  • Hutchison lawyer argues Three-O2 deal has few antitrust issues

CK Hutchison Holdings Ltd. representatives met with senior European Union competition officials to fight for plans to combine its Three unit in the U.K. with Telefonica SA’s O2 as regulators try to squeeze better concessions from the duo.

Thursday’s high-level talks in Brussels gave Hutchison a chance to counter EU concerns that the deal to create Britain’s biggest mobile phone business might harm consumer choice, said two people familiar with the meeting, who asked not to be named because the discussions were private.

A lawyer for Hutchison said Friday that while EU regulators are citing economic models that predict the deal would trigger price rises of as much as 6.7 percent, this is far less than forecasts for previous phone mergers approved by the EU.

Billionaire Li Ka-Shing’s Hutchison has made his assault on the British phone market a top priority. Amid growing concerns over the tie-up, Canning Fok, Li’s top lieutenant, vowed last month not to raise prices for five years if the deal goes through. He also said the combined company would invest 5 billion pounds ($7.2 billion) to strengthen network coverage, reliability and data speeds.

Increasingly Wary

Three is under pressure to upgrade its offer to placate merger officials who are increasingly wary of big deals that reduce the number of mobile-phone network operators. TeliaSonera AB and Telenor ASA’s attempt to merge their Danish units collapsed in the face of EU opposition last year.

While the 6.7 percent price-rise prediction is above a 5 percent threshold the EU often views as problematic, it’s dwarfed by EU forecasts for earlier phone deals in Germany and Ireland, Thomas Wessely, a lawyer for Freshfields Bruckhaus Deringer LLP in Brussels, who represents Hutchison in the O2 transaction said at an event in Brussels.

The EU’s so-called upward pricing pressure models showed far higher potential increases in previous deals that were cleared with concessions, Wessely said. It foresaw a 15.6 percent increase for a merger between Telefonica’s German unit and E-Plus and predicted a price increase of 11.2 percent for Hutchison’s bid for O2 in Ireland.

Hutchison representatives declined to elaborate on his comments or about Thursday’s meeting. The European Commission declined to comment.

The company is arguing that Three and O2 aren’t each other’s closest competitors, which would be a red flag for regulators checking for possible price increases, Wessely told an event in Brussels. Customers are more likely to switch to BT Group Plc’s EE or Vodafone Group Plc, he said.

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