CK Hutchison’s U.K. Carrier Three Is Eyeing Mobile Deals Again
CK Hutchison Holdings Ltd.’s British phone company Three UK is back on the lookout for deals.
(Bloomberg) -- CK Hutchison Holdings Ltd.’s British phone company Three UK is back on the lookout for deals as the hurdles that foiled a previous merger attempt have fallen away.
The Hong Kong-based conglomerate’s plan to buy Telefonica SA’s British carrier O2 was vetoed by the European Union in 2016. Regulators cited risks to competition, services and prices. But that decision was dramatically overturned in May by the bloc’s General Court.
The shift to home working during the coronavirus pandemic has also made governments more concerned about the quality rather than the absolute number of competing networks, said Three Chief Executive Officer Robert Finnegan. So a deal similar to the scuppered Three-O2 takeover could get a green light in future, he said in an interview.
“Covid-19 and the decision in Europe have opened minds at government,” said Finnegan. Officials are “more open, given the Covid situation, to consolidation within the market to ensure that the quality of infrastructure is at the level that it needs to be.”
The question is what deals are available to Three, the smallest of Britain’s four wireless carriers. O2 is now set to merge with Liberty Global Plc’s cable company Virgin Media.
Finnegan, who also leads Three in Ireland, said its acquisition of O2 in that country has successfully spurred network investment, vindicating Three’s position. He also pointed to Hutchison wireless deals in Austria and Italy.
Britain’s other U.K. mobile network operators are BT Group Plc’s EE and Vodafone Group Plc.
Asked about specific combinations with other U.K. mobile providers, Finnegan said he was “talking hypothetically, theoretically.” Three has “always been a consolidator, so as opportunities arise we would look at them.”
‘Dysfunctional’
Consolidation makes sense because Britain’s telecommunications market is “dysfunctional,” said Finnegan, citing high levels of debt, weak share prices and pressure for investment.
Mobile providers face a challenge from increased demand for rural broadband capacity due to home working, the cost of buying 5G airwaves and the impact of government bans on equipment made by China’s Huawei Technologies Co., he said.
Read More: Three UK Signs Ericsson to Replace Huawei for 5G and 4G
“You’ve got four players, some of which have the scale but haven’t got the ability to invest, others that don’t have the scale but want to invest -- and that would be us,” said Finnegan. The EU’s previous opposition to allowing the number of carriers to fall in a given market from four to three is “not conducive to investment,” he added.
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