CK Hutchison, the parent of U.K. operator Three, is stepping up its offer to allay competition concerns about its proposed takeover of O2 UK, according to a report in the Financial Times. While the European Commission and U.K. regulator Ofcom have reportedly pushed for the company to support a fourth network in the U.K., Hutchison considers that unworkable and is instead proposing to reserve 30 percent of its network for one or more newcomers. This would include permanent access to a share of the network or even partial ownership for one or more players, such as a starter package of spectrum and ownership of some O2 network sites. Hutchison has lined up potential takers for the network capacity, including Sky, which is interested in a long-term deal. Other candidates include Virgin Media, TalkTalk and France’s Iliad. Hutchison also offered to sell O2’s 50 percent stake in Tesco Mobile.

Tarifica’s Take

The Three–O2 deal has been met with trepidation by U.K. regulators and by the EC, which are concerned over the possibility of reduction in competition and a rise in prices if network consolidation were to occur. That makes sense in light of the fact that prices did appear to rise after a similar consolidation in Austria involving Hutchison. By making these very large concessions, Hutchison is clearly indicating that it will do almost anything to make the deal go through, and that it considers depleting its network resources preferable to accepting a challenge from a new, fully independent MNO.