CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Doubt cast on O2 Three merger

Article By: ,  Financial Analyst
October 8, 2015 3:36 PM

UK telecoms regulator Ofcom has cast doubt on the proposed £10.2 billion merger of O2 and Three.

During a speech in London on Wednesday night (October 7th), Ofcom chief executive Sharon White said that "four operators is a competitive number," – however the merger would reduce the number of UK mobile networks to three.

She noted that mobile operators had implied that the UK market was too competitive and that profit margins were too low. The companies could benefit from consolidation, but she indicated that competition would provide more benefits.

"Consolidation can in theory have benefits – improving economies of scale and making it easier to finance investment. However, Ofcom's experience is that competition, not consolidation, drives investment and delivers low prices," she said, adding that having four UK networks had delivered "good results for consumers and sustainable returns for companies".

Competition risk

If the Three/O2 merger went through, Ms White explained the resulting company would have more than a 40 per cent market share and could be problematic for the Three, which she called the "competitive new entrant".

Last week, the Competition and Markets Authority (CMA) said that the proposed merger threatened competition. The CMA has asked the European Commission for the right to investigate the deal and argued that there were "clear links" between this deal and BT's desire to buy EE.

The European Commission will have until October 30th to decide whether to allow the CMA to investigate. Normally, the EC would look into these issues, but the CMA says the deal mostly affects UK consumers.

According to Ms White, this is a crucial period for the telecoms market, and she warned that the trend for mergers could put competition at risk.

"The scale of change in the next 12 months and beyond could dwarf what we have seen over the last ten years. If the current merger wave continues, there are risks to consumers and businesses who have enjoyed one of the most competitive markets of recent years."

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024