Ofcom hints at mobile market consolidation according to latest report

Ofcom hints at mobile market consolidation according to latest report

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UK telecoms regulator Ofcom has published its latest report that indicates the mobile market could be due for further consolidation.

Ofcom set out its proposals in a discussion paper titled 'Ofcom’s future approach to mobile markets'.

The biggest standout in the entire report is Ofcom's initial view that it is clarifying its position on mobile consolidation.

It states, that debate on whether a particular merger will lessen competition "depends on the effectiveness of competition that can be expected in the market after the merger, rather than just the number of competitors".

As a result, the regulator will instead be "informed by the specific circumstances of that particular merger, taking into account how markets are evolving".

The news was met with a strong response from the market, particularly Three UK, which in 2016 had its billion-pound merger with O2 block by the European Commission and the UK's the Competition and Markets Authority (CMA).

On the release of the report, Robert Finnegan, CEO of Three UK, said that despite the company's extensive network and offerings "… we could do so much more if the environment was better geared towards investment."

He added that "the UK does not have the quality of mobile infrastructure it deserves. Investment is spread too thinly across too many players, meaning our networks are sub-par by international standards".

According to Finnegan, "consolidation in the industry could change that. Moving from four to three mobile players in the UK would mean better, smarter investment in the networks which would, in turn, improve the quality and scale of connectivity in Britain and would unleash more competition".

At the same time, Vodafone's CEO, Nick Read, hinted at further M&A activity in the UK telling the Sunday Times "I’m firmly supportive of consolidation on the right terms,” adding that a merger between Vodafone and Three UK should be approved by regulators if it were to go ahead.

Vodafone is said to also be pursuing M&A deals across Europe, namely in Italy, Spain and Portugal.

Other key findings from the report include, the decision to not implement any new regulatory interventions to mobile markets but to instead, 'monitor how competition evolves and assess any key risks that might affect the delivery of good outcomes'.

The paper states that Ofcom will provide better information for customers enabling them to make better decisions about their supply, largely through its Mobile Reporting Project. It will also 'invite further input on the potential wider benefits to society'.

In the area of investment Ofcom proposes to set out more explicitly how it has considered investment when making policy decisions, and that there are no plans to introduce new consumer pricing rules.

Lastly, Ofcom is currently carrying out a review of the UK’s net neutrality framework, with plans to publish its initial findings in Summer 2022.

The news comes just over six months after the £31 billion joint venture between Liberty Global and Telefónica to merge Virgin Media and O2.

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