Out-Law / Your Daily Need-To-Know

Ofcom delays next spectrum auction until after decision is made on planned Three/02 merger

03 Dec 2015, 1:08 pm

The UK's telecoms regulator has delayed its plans to auction off more spectrum for mobile broadband use until after the European Commission decides whether to allow the proposed merger between rival mobile network operators Hutchison 3G UK (Three) and Telefónica UK (O2).

The regulator said it had expected to open the auction process for spectrum sitting in the 2.3 and 3.4GHz frequency bands this month. However, it has postponed doing so after Three and O2 threatened "to bring judicial review proceedings against Ofcom’s decision to commence the auction process before the outcome of the European Commission’s consideration of the proposed merger between those two companies", it said.

The European Commission is due to rule on the Three/O2 deal "no later than mid-May 2016", Ofcom said.

"Ofcom will not now commence the auction process until the European Commission has taken its decision as to whether the proposed merger … is compatible with the common market," the regulator said in an update on its auction plans.

Telecoms expert Reg Dhanjal of Pinsent Masons, the law firm behind Out-Law.com, said: "BT, EE, O2 and Three and their parent companies will now have more certainty about the planned mergers before they invest in more spectrum. This is a development that will no doubt be welcomed by them."

The 2.3 and 3.4GHz spectrum is currently owned by the Ministry of Defence (MoD). In May Ofcom said it would "withhold around 60 MHz" of the 190 MHz of spectrum being released by the MoD across the two bands from the auction. At the time it said uncertainty over how the future telecoms market will look in light of the proposed Three/O2 merger and the then planned acquisition of EE by BT was behind its decision.

Subsequently the BT/EE deal has been given provisional approval by the Competition and Markets Authority (CMA) in the UK, with a final decision expected next month.

The European Commission is currently carrying out "an in-depth" competition investigation into the planned Three/O2 deal. The Commission said last month that it is concerned the proposed £10.25 billion transaction "could lead to higher prices, less choice and reduced innovation for customers of mobile telecommunications services in the UK". The Commission is responsible for assessing the potential impact of major M&A deals on competition in EU markets.