With Sale at Risk, O2 CEO Seeks Regulatory 'Refresh' in EU

  • EU oversight inconsistent with bundling trend, Dunne says
  • `The question is, do we want to have European champions?'

O2 Chief Executive Officer Ronan Dunne, facing an expected European Commission veto of the sale of the U.K. mobile operator to CK Hutchison Holdings Ltd., called for a “refresh” of telecommunications regulation to promote regional consolidation. 

O2 owner Telefonica SA has “exceptionally strong assets” in the U.K. even if the deal is blocked, Dunne said on Bloomberg Television. “We’re well-positioned whatever the outcome,” he said.

Ronan Dunne
Ronan Dunne
Photographer: Pau Barrena/Bloomberg

But more broadly, he said, Europe’s scores of fixed-line and mobile telecoms operators need to combine in order to accelerate the rollout of bundled offers that provide consumers with communications services and entertainment.

“The logic of the way we are being regulated at the moment is inconsistent with the actual market that consumers observe,” Dunne said separately. “The debate that is going on around our transaction at the moment is looking at U.K. telecoms as a mobile-only market, separate from the fixed and TV markets.”

The European Commission is expected to block Hutchison’s $14.5 billion deal for O2 within weeks. The commission is also preparing to send Hutchison and VimpelCom Ltd. a statement of objections to a merger that would create the largest wireless provider in Italy, people familiar with the situation have said.

Telefonica CEO Jose Maria Pallete said on a conference call Friday that Hutchison had offered “unprecedented” remedies to solicit a favorable decision in the U.K. from the commission, but that “political interference” may have affected the process, given the June 23 referendum in Britain on whether or not to leave the EU. “A negative decision cannot be disregarded,” Pallete said Friday on a conference call with investors.

The expected decisions could put the brakes on a round of consolidation that has reduced the number of major mobile operators in several European countries to three from four -- a reduction that carriers say they need in order to generate sufficient profits to invest in network upgrades.

Dunne urged regulators to facilitate further consolidation within markets as well as across European borders.

“The question for Europe generally is, do we want to have European champions?” Dunne said. “If so,we need to look at regulation on the basis of the convergence trends that are happening.”

Dunne spoke as Telefonica posted its lowest quarterly revenue in more than a decade, hurt by competitive pressure in Europe and depreciating currencies in Latin America, where the company has significant operations.

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