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    BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers?

    This is a discussion on BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers? within the General chat forums, part of the Community channel category; BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers? Not if Brussels can ...

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      BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers?

      BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers?
      Not if Brussels can help it

      Analysis So far 2016 looks to be the year of mega telecoms deals in Europe, with the soon-to-complete 12.5bn EE/BT deal in the UK set to have a major impact on the market.

      On top of that is the 10.25bn merger between O2 and Three, which could go ahead later this year, although European regulators have treated this with a less-than-enthusiastic response.

      And it's not just the UK that is keen to encourage telephonic bed-hopping; moves toward consolidation are happening across the continent as well, with French telcos Orange and Bouygues entering talks which could result in a merger estimated at 7.3bn.

      Certainly Europe has a vastly fragmented market, with KPMG estimating the region has 150 mobile operators. In contrast, the US has just four.

      And in a mature market that has few new customers, the only way for providers to make more cash, and to fight off the threat from "disruptive" entrants such as online messenger WhatsApp, is to realise the economies of scale that come with mergers.

      To put it very simply: "the more people they can have on fewer base stations or fibre, the more money they can make," says Steven Hartley, analyst at research company Ovum.

      While there may be a compelling financial case for buddying up, competition officials in Brussels are taking a dim view of such deals, which they argue could leave consumers with less choice and a bigger bill.

      It was with that in mind that the EU's anti-trust chief Margrethe Vestager opened a probe into the Three/O2 deal late last year. Vestager has taken an unapologetically tough stance on telco mergers, having already scuppered a deal in her native Denmark between Telenor and TeliaSonera.

      In October she said: "In competitive markets, companies have strong incentives to invest and innovate to offer superior products and win business from their competitors."

      However, John Strand, a telecoms analyst, opposes this view. "There's no academic evidence to support the idea that greater competition leads to more investment," he says.

      "Look at the US market, it has far less competition, yet on average broadband providers invest at twice the rate of European, and the gap is growing." Fewer mobile operators would similarly lead to greater investment, he says.

      Protecting people? Pah!It's about ideology


      Strand believes that the tough stance taken against mergers is purely ideological. He points to the networks infrastructure space, which has undergone massive consolidation - such as the recent mega 11.5bn merger between Alcatel-Lucent and Nokia.

      Unlike the mobile operator mergers, that deal went through relatively easily as those companies are not dealing with consumers directly.

      However, Ovum's Hartley views a deal such as the agreement between O2 and Three as necessary for competition in the UK market.

      "The key question this year is whether European regulators are going to allow that deal, which has a political angle because they need to make sure consumers are not disadvantaged.

      "The economies of scale make absolute sense as it is a saturated market. Regulators have to somehow balance that see-saw with the consumer interest," he adds.

      Hartley says the BT/EE deal could change the entire landscape, as it will create the first truly joined up "quadplay" - broadband internet access, television and telephone with wireless service - operator.

      "That creates a huge commercial advantage for BT, and others will have to respond," he says.

      "The problem is that the European regulators may not be viewing the deal in the broader context of UK market. To me Three and O2 combining creates a large operator that could compete with the quadplay player like BT, which will offer attractive bundles to customers," he says.

      "A combined Three and O2 would have economies of scale that could break the bundle strategy." In that respect a bigger mobile operator could offer consumers more better value by wooing them with deals designed to take on BT.

      Regardless of Europe's probe, it seems increasingly likely that Blighty's communication watchdog Ofcom will make some sort of remedy to other operators outside BT/EE in its long-anticipated Communications Review this month.

      That might not necessarily involve the complete spinout of BT's Openreach, but Hartley believes a further separation of the broadband division will at least happen. It may also make some special provision for Vodafone, which will be dwarfed by its competitors if the Three/O2 deal goes through.

      One thing is certain this year: the tussle between regulators and telcos looks set to continue. And that is something that could rumble on as the tie-up between mobile and fixed connectivity encapsulated in the BT/EE could set a trend for other telcos.

      "It will be interesting to see how Sky, TalkTalk, Vodafone and Virgin respond once the BT/EE deal goes through," says Hartley. "I'd be surprised if another deal of some form doesn't happens, if not an acquisition then a strong commercial relationship between some of those providers."


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      Re: BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers?

      This time last year Sky announced that it had done a deal with O2 and would be launching a Sky branded mobile network in 2016 using the O2 network like Tesco Mobile does but i can not find any further mention or info about this since those initial announcement reports in early 2015.
      Does anyone know if this is still going ahead and if so are there any firm timings on when it will launch, as im heading towards the latter part of my current S5 contract with Tesco Mobile and would really love to upgrade to an S6Edge+ soon but wouldnt want to tie in to a new 2y contract only for Sky to then launch and find i could have gotten a better deal with quadplay.

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      Re: BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers?

      It is happening.

      At this time I have no further information available to share (i.e. prices, package deals, dates, contract terms, roaming, etc.).

      I have a similar dilemma to consider myself as my phone's contract is up this month.

      I'm currently with Three and appreciated the ability to use the phone whilst on holiday. O2, the network Sky will be using, would have charged me for the privilege.

      Of course in 2017 European roaming charges will be abolished. However there may still be charges for anyone visiting other countries such as the USA & Egypt.

      Sky Fibre Unlimited Pro: Connected at 80,000 kbps / 20,000 kbps
      Previous ADSL2+ Speed 19999 kbps 1153 kbps, Line Attenuation 17.5 db 6.9 db, Noise Margin 7.5 dB 8.7 dB
      Speedtest: 17.15MB/s 0.97Mb/s Ping 31 ms

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      Re: BT and EE, O2 and Three: Are we in for a year of Euro telco mega-mergers?

      It was great roaming FOC in the US

     

     

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