26 October 2016
Telefonica says it has many options for its British O2 unit in case a deal with CK Hutchison falls through. Photo: Internet
Telefonica says it has many options for its British O2 unit in case a deal with CK Hutchison falls through. Photo: Internet

EU officials reject CK Hutchison bid for Telefonica’s O2

A multibillion-dollar bid by CK Hutchison Holdings Ltd. for Telefonica’s British mobile operator O2 has been blocked by senior European Union officials, dashing any hope for a deal.

The decision will pave the way for a formal signoff by the bloc’s 28 commissioners expected next week, the Wall Street Journal reports, citing people familiar with the matter.

Senior technical experts meet to hash out final points of contention among the commission’s various departments before final approval is sought.

Once there is a consensus at this level, it is rare for commissioners to overturn it.

The EU has until May 19 to make a final decision on the deal.

The companies had offered commitments to help waive the deal through but ultimately the remedies coul not mollify the EU antitrust regulator’s concerns the merger would lead to higher prices and less choice for UK consumers.

A spokeswoman for the commission declined to comment. Hutchison declined to comment.

Telefonica could nott be reached for comment.

Last week during a presentation to analysts, Angel Vila, Telefonica’s chief strategy and finance officer, said the company has “many options” if the deal with Hutchison does not go through.

The imminent EU decision represents a tougher attitude by EU regulators toward consolidation among telecom companies in the region, particularly in cases in which the number of operators in a given country shrinks from four to three, as would have been the case with CK Hutchison’s UK deal.

The deal would have joined Hong Kong-based CK Hutchison’s Three UK, the country’s fourth largest operator, with Telefónica SA’s O2, the UK’s second largest mobile operator.

Telecom operators in Europe have been racing to merge in recent years in efforts to share costs as revenues dwindle.

They argue they need to merge with rivals in the same country to increase investment in networks and to share costs.

EU antitrust chief Margrethe Vestager’s predecessor, Joaquín Almunia, waved through a series of so-called “four-to-three” deals, including in Germany and Ireland, but in speeches, she has warned that excessive consolidation can lead to larger bills for customers and can kill incentives to innovate.

– Contact us at [email protected]


EJI Weekly Newsletter