EU Blocks Three's Takeover Of O2

The European Commission has formally blocked the proposed £10.3bn takeover of O2 by CK Hutchison, the company which operates Three.

The regulator said it had strong concerns that UK mobile customers would have had less choice and paid higher prices as a result of a takeover, and the deal would have harmed innovation in the mobile sector. Commissioner Margrethe Vestager, in charge of competition policy, said:

"Allowing Hutchison to takeover O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector. We had strong concerns consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal."

The planned merger, which was valued at £10.3bn, would have left the UK with just three major mobile phone networks.

CK Hutchison, which owns Three, is considering a legal challenge against the decision. In a statement, the company said: "We will study the Commission's decision in detail and will be considering out options."

It (Other OTC: ITGL - news) went on to add it believed the acquisition of O2 from Spain's Telefonica (LSE: 826858.L - news) "would have brought major benefits to the UK, not only by unlocking £10bn of private sector investment...but also addressing the country's coverage issues, enhancing network capacity."

Ofcom believe this is the right outcome for customers. A spokesperson for the regulator said:

"Three and O2 are important and effective competitors in the UK, helping to deliver innovation, investment and competitive prices over many years. Competition must be sustainable, and regulation should support it. We will aim to do so through tools such as market reviews or auctions of mobile airwaves."

O2 says the company has "continued to perform well in the market whilst the Commission process has taken place." In a statement, it said: "Our customers are our priority." Owned by Spain's Telefonica, O2 is now likely to become a takeover target for Liberty Global (NasdaqGS: LBTYA - news) .

A proposal to offload Telefonica's stake in a joint venture with Tesco (Xetra: 852647 - news) and to offer network capacity to Tesco Mobile and Virgin Media in an effort to get the deal approved was rejected by the Commission.