April 11, 2016 / 8:52 AM / a year ago

UK's CMA voices serious concerns over Hutchison-Telefonica deal

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Women use their mobile phones outside an O2 shop in Loughborough, central England January 23, 2015.Darren Staples

(Reuters) - UK's Competition and Markets Authority (CMA) has expressed serious concerns about the proposed merger between Hutchison 3G UK and Telefonica UK and called for the European Commission to prevent "long-term damage" to the UK mobile telecoms market.

The proposed merger is likely to lead to increased prices and/or a reduction in the quality offered to UK consumers, CMA Chief Executive Alex Chisholm told the European Commission's Competition Commissioner Margrethe Vestager. (bit.ly/1SYPxji)

European Union antitrust regulators launched a full in-depth investigation in October into Hutchison Whampoa's 10.3 billion-pound bid for British mobile operator O2 on Friday, concerned that the deal may push up prices.

The potential deal would make Li Ka-shing's Hutchison, which operates the Three UK mobile network, the top mobile operator in Britain.

"It is clear that the remedies offered fall well short of what would be required to meet the relevant legal standard, as detailed in our case submissions," the CMA said, adding that the only available option for the EU was a prohibition if the suggested remedies are not enacted.

On Monday the CMA suggested that the companies divest either the Three Mobile or O2 mobile network business completely or allow for carve-outs from the divested business.

Hutchison said it was "very disappointed" the CMA had intervened, adding that it could have "no legitimate" status in the process.

"It is of no surprise that the CMA opposes the merger," it said in a statement.

"It always has, and so has (British regulator) Ofcom. But it is for the Commission to assess any competition concerns, on the basis of the facts and proposed remedies."

Hutchison said the remedies it had proposed -- including striking deals for other operators to rent more than 40 percent of the combined network capacity -- went far beyond remedies accepted in previous deals in the sector in Europe.

It said the CMA's suggestion that either the Three Mobile or the O2 network should be divested was a "red herring" that would undermine the whole rationale behind the merger.

"There is no taker for such a remedy," it said.

Spain's Telefonica said in March 2015 that it had finalised a deal to sell its British mobile business O2 to Li Ka-shing's Hutchison Whampoa.

Reporting by Vidya L Nathan in Bengaluru and Paul Sandle in London; Editing by Ed Osmond

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