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Ongoing Three/O2 case creates M&A uncertainty for telcos

European telecoms companies faced fresh regulatory uncertainty on Thursday after the EU’s top court told a lower tribunal to re-examine its decision to overturn a veto on Three UK’s 13-billion-pound ($16.9 billion) bid for O2 UK seven years ago. The case is closely watched by the telecoms industry, as victory for Three UK owner Hutchison could make it harder for EU antitrust regulators to block mergers that reduce the number of mobile players in a country.

Hutchison is trying to do that once again, after last month agreeing a 15 billion pound merger of Three UK with Vodafone’s UK business. Back in 2016, retired billionaire Li Ka-shing’s Hutchinson conglomerate had aimed to become Britain’s biggest mobile telecoms network operator by combining Three UK with Telefonica’s O2 to better compete against BT’s EE and Vodafone, but it ran into opposition from EU regulators.

EU antitrust enforcers said that deal, which would have reduced the number of mobile players from four to three, could push up prices. Hutchison subsequently challenged the EU veto. The General Court in its 2020 ruling annulled the EU decision, raising the bar for regulators to block mergers that hinder competition and prompting the European Commission to appeal to the Luxembourg-based Court of Justice of the European Union (CJEU).

The CJEU on Thursday sent the case back to the lower tribunal. “The General Court must rule once more on the lawfulness of the Commission’s prohibition of the acquisition of Telefonica Europe (O2) by Hutchison 3G UK (Three),” CJEU judges said.

“The General Court applied a standard of proof which does not follow from the Merger Regulation, as interpreted by the Court of Justice, and thus made an error in law.” The case is C-376/20 P Commission v CK Telecoms UK Investments. Reuters

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