As Three’s owner eyes up O2, will more sector consolidation prove negative for consumers?

Chinese company Hutchison Whampoa is to sell O2 for £10bn (Source: Getty)

Kester Mann, principal operators analyst at CCS Insight, says Yes.

A move from four mobile operators to three will undoubtedly raise concerns among UK consumers that they’ll end up paying more for mobile services. Indeed, evidence in other European markets, notably Austria, points to an increase in prices following similar in-market consolidation.

Mobile users in the competitive UK market have benefited from among the lowest tariffs in Europe, a factor that has helped drive uptake of 4G services and spurred investment in networks and technology. A smaller number of competitors would certainly concern Ofcom, which has worked painstakingly to preserve the UK as a four-player mobile market.

Assuming the deal between Three and O2 is completed, mobile tariffs in the UK would be set by just three huge providers, each with at least 20m subscribers. More significantly, the market would no longer include a smaller disruptive provider to keep larger rivals on their toes.

Roslyn Layton, PhD fellow at the Centre for Communication, Media and Information Technologies at Aalborg University, says No.

Consolidation is about getting economies of scale to minimise the costs of building mobile networks. The UK has challenges with coverage in rural areas. In a market with falling prices, as consumers switch to free services such as WhatsApp, operators need to consolidate to get the capital to build more advanced networks to deliver data.

BT has moved on EE. Now with Three picking up O2, some 30m customers can be served with better economy, delivered from cost savings and revenue synergies totalling up to £6bn. Across Europe, markets are consolidating down to three network providers to get better network economy.

Credible competition can exist in a dynamic mobile market with just two players. As long as the technology evolves, consumers will be served. It’s the level of technology, not the number of players, that drives competition.

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