Virgin gives blessing to O2/Three merger Virgin Media has weighed in to give its blessing over the controversial £10.5bn proposed merger between Three and O2, hoping such a move would give it greater network access. The intervention follows a pledge yesterday by Hong Kong-based CK Hutchison, which owns Three UK, that it would enable competitors in the UK to offer …
@MrWibble - I agree it's utter tosh.
It's interesting to note all O2/Three's competitors like Virgin and Vodafone are quite happy with this merger - perhaps because they see the benefits to themselves of the oligopoly getting smaller, reducing the competitive pressures on their own businesses.
Plus there's the "we like it because we think it'll hurt our new bogey man enemy BT and their costly EE acquisition" warm approval from the Sky wing of Murdoch towers.
Still no word from Hutchison how they're going to deal with Three being part of MBNL and O2 being part of Cornerstone. Tear up Cornerstone agreement and face sueball from Voda? Tear up MBNL agreement and face sueball from BTEE? Try and make both separate networks work and lose major benefit of merger? Spend billions with lots of network headaches on the way which ever is selected?
Perhaps the simplest option would be allowing Three+O2 subs to roam onto the two still separate networks, as Orange/T-Mobile did when they started bringing their networks together, then work through a big de-dupe on the two networks; but I suspect the Cornerstone and MBNL agreements are pretty watertight to prevent one party neglecting their investment obligations so they wouldn't see any cost savings in network operation.
The only certainty is that prices will rise and service will deteriorate if it goes ahead.
Easy solution sell Cornerstone and MBNL to a separated and independent Openreach so it has ALL the wires and masts and the phone providers whoever they are wired or mobile have to buy cable or wireless access from it.
should open up competition if the networks can only compete on price and service and all had the same merged network so coverage would be identical and improved for all* (one would hope) It would also open the field to more operators as the cost of market access would not require the upfront cost of building their own network.
Don't forget that he will be talking about stimulation between VM and sky, if they can suddenly offer a fast mobile network than this gives them another arrow in the quiver.
In regards to MVNOs than this is going to hamper their profits as there is less negotiating room and less options for them to move to if the prices become too high for the shareholders.
Unfortunately, there's a difference between competition and serving customers best interests, and civil servants and bureaucrats don't (generally) understand that.
So Mockridge could be right in what he says, but that doesn't mean that it'll benefit you or me. Under the entirely theoretical "perfect competition", market forces serve customers well. The further you get from that, the more constrained the market becomes. Clearly a market of three players is at best an oligopoly, at worst a cartel - in either case there's insufficient choice to benefit consumers. And with network sharing, there's even less choice behind the scenes.
The asset owners won't like it, but we've reached a point where all fixed and wireless networks (unless owned by the end users, eg as a Co-op) should be forced to operate as open access, with any integrated operation having to operate the network at arms length from the retail operation. We do that in gas, electricity, water. Needs to happen to Openreach, VM cable, and the masts and backbone for mobile comms.
If there's no predatory pricing or profiteering, then the integrated and incumbent players will have nothing to worry about......
BT may decide to terminate their access to EE's mobile network
That would be a very high risk strategy for BT, because it would invite a CMA referral, and EU market abuse interest. I suspect VM pussyfoot around BT because they are worried that if BT need to be forced to do common carriage, then the effective BT lobbying machine will start pushing for open access on VM's cable network. So the Openreach question colours the arguments on mobile network access.
Open access on VM cable would be a good thing for consumers. It would also be a good thing for VM if I am right in my suspicion that VM's cable network is very lightly utilised, because they'd still be a big retailer of packages, but they'd also get bigger revenues from the network.
Even if O2 went under (i.e. administration then liquidation) there would still be assets in the business that could be realised: physical network (stake in Cornerstone RAN plus backhaul), customers, stores, stock, spectrum etc. It's likely the business could be sold as a going concern to another entity if Telefonics walked away from O2 UK in that situation. For now there is no implication that O2 UK is even close to that situation, although things aren't too happy at Telefonica themselves - hence the sale to pay down their debt.
Don't forget the cable companies in the UK have been through multiple bankruptcies, and debt for equity swaps yet still exist even if the early share/debt holders have been wiped out many times over. Unfortunately they exist as a single company (Vermin Media) so not a good example who considers the merger a bad idea.
One thing I'm not convinced on is that if Three don't buy O2 UK the business is unviable so the merger is do or die for O2. The markets may not be that rosy at the moment (are they ever?) but the option is there to spin out O2 UK through an IPO. It may be risky but no less so than trying to get clearance for the acquisition by Three.
Telefonica is already a listed company. How do they list the O2 UK entity without ring-fencing their equity in it? That I'd imagine would be a very costly if the O2UK IPO did not do well, which it very likely will not.
Voda stock performance depends heavily on its global presence.
And for those who say prices will rise and things will fester, could you cite some evidence from past mergers? These tales of pre-merger competitiveness with lower prices and wonderful coverage has eluded my personal experience!
EE are deploying 4G+/LTE-A. Voda and O2 still are just getting round to even doing 4G properly. They never did 3G well. These were the biggest before the merger. There is no way orange or tmob or 3 would have taken the lead over Voda/O2.
An oligopoly, with less competition would imply that EE don't need to bother with LTE-A until they're done miking 4G. Yet they have.
If you say prices have risen (for the same product), why aren't Voda and O2 bothering if the market now actually allows them to charge more?
I'm curious as I don't see any actual evidence, it's largely cynicism. Some anecdotes citing worse customer care are far easier to correct (£) than getting infrastructure investments (££££). That latter clearly needs significant scaling now given how rapidly existing cell capacity is exhausting, let alone for operators to think of new cells in not spots.
Considering how much spectrum costs, the 3G auctions are what held back the industry before IMO, none of the operators, all 4 of them, would compete on price. It rose their capex costs and cut down R&D budgets. I don't see how, without some consolidation to encourage investment and scale, the stagnation of the industry can be stopped from happening again. It's already begun. The 3G problem was one of price, today's problem is coverage and capacity. The latter is not seeing the investment it should and it hadn't even with four operators. IMO EE is only one that is offering something better on this front over the pre-merger era/participants.
Another oddity in this affair : How can the EE commissioner and Ofcom leadership take opinion driven positions. It seems strange to me too. They aren't giving clear reasons, just that they don't "like" the idea. It's like a judge assuming guilt because the defendant "looks" guilty. I honestly think it's a call to the companies involved to pamper them behind the scenes and not break the law.
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