The European Commission has blocked Hutchison, which owns mobile provider Three, from buying Telefonica UK, the firm behind rival provider O2.
It says it has “strong concerns” that the deal would leave UK mobile customers with less choice and paying higher prices, as the move would have left just two other networks vying for customers; Vodafone and BT’s Everything Everywhere – better known as EE.
The Commission was also concerned that a merger between Three and O2 would reduce the number of mobile network operators willing to host other mobile operators on their networks – again hampering competition.
This is because in addition to the four mobile network operators – EE, O2, Three and Vodafone - there are a number of mobile "virtual" operators, such as Virgin Media, Talk Talk and Dixons Carphone's iD.
These don’t have their own networks, but instead piggyback on the big four.
In addition, the Commission believed a takeover would likely have a negative impact on the quality of service for UK consumers by hampering the development of the mobile network infrastructure in the UK.
Commissioner Margrethe Vestager, in charge of competition policy, says: "Allowing Hutchison to takeover O2 at the terms it proposed would have been bad for UK consumers and bad for the UK mobile sector. We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal.”
However, Hutchison says it may challenge the decision. In a statement it said: “We are deeply disappointed by the Commission’s decision to prohibit the merger between Three UK and O2 UK. We will study the Commission’s decision in detail and will be considering our options, including the possibility of a legal challenge.”
A similar takeover of EE by telecoms provider BT was approved earlier this year.
In this instance, the UK’s Competition and Markets Authority gave the deal the green light as it said EE mainly focused on the mobile market, while BT mainly operated in the broadband sector – meaning the tip up wouldn’t have a significant impact on competition.