Yahoo Finance Mobile Giant Pledges O2-Three Price Freeze
Tens of millions of mobile phone customers will see a five-year price freeze following the expected £10bn merger between operators O2 and Three, according to the Hong Kong firm behind the deal.
The takeover, which will see Three owner CK Hutchison swallow up O2 to create the UK's largest operator, is under investigation by European regulators amid concerns it could reduce competition and push up prices.
But Hutchison, controlled by tycoon Li Ka-Shing, is seeking to smooth the path to the deal being cleared by pledging that it will hold down tariffs.
The company said it would not raise the price for consumers of a voice minute, a text or a megabyte in the five years following the merger. It (Other OTC: ITGL - news) said it would pass on the cost savings resulting from the tie-up and that customers would see lower bills.
Canning Fok, group managing director, said: "From the outset, we have followed the principle that as technology improves people should always get more and pay less for their mobile services.
"That has not always made us popular with our competitors.
"In short, over the next five years Three+O2's customers will be getting more and paying less than they do today for mobile services and the wholesale market will also be better off.
"Over the coming weeks the promises I have laid out will be an important part of the case Three will put to Europe's competition authorities."
The merger will create a business with 31 million customers and a bigger market share than rival EE – which is itself being swallowed up by BT.
The telecoms sector is undergoing a wave of consolidation with operators fighting for market share and many bundling together mobile, broadband and other services.
Earlier this week Sharon White, head of regulator Ofcom, expressed fears in a Financial Times article that the O2-Three deal could threaten competition and push up prices, with the new business controlling two in five mobile connections and reducing the number of networks to three.
Ernest Doku, telecoms expert at uSwitch.com, said the announcement showed Hutchison (HKSE: 0013-OL.HK - news) trying to "get ahead of the game" on the European probe into the merger and that the deal could still stifle the market.
He said: "Reducing the UK mobile market to just three big players – one with a market share of more than 40% – would restrict fluidity for bill payers, who can currently save up to £155 a year just by switching when their contracts are up for renewal."
Even (Taiwan OTC: 6436.TWO - news) taking into account Hutchison's promises, there was a "real risk this merger could stifle innovation and competition, reduce the incentive for networks to undercut each other, and lead to less innovative propositions", he said.
"We would need to see more detail on its price freeze pledge, as there remains a question on what will happen to monthly contract prices where networks can potentially hide behind the absorbed handset cost."
