O2 sim card

Why Three buying O2 is bad for consumers

O2 sim card

Competition is what has kept the UK’s mobile industry competitive over the years, but recent acquisitions and consolidation are making the marketplace less competitive than ever.

Spanish telecoms group Telefonica put O2 on the market a few months ago, and there has been interest from a number of parties including BT, but it appears that the UK’s largest mobile network will soon be sold to Three-owner Hutchison Whampoa for £10 billion.

Three has been one of the major disruptive forces in the UK’s mobile market since its launch, offering users large data bundles and unlimited calls and texts contracts while its competitors still thought that 100MB of data was sufficient as smartphones appeared on the market.

When Three launched in 2000 with its 3G-only network, it had no customers, and this meant it needed to innovate and focus on competitive deals to sway users away from the other networks. Within a few years it had managed to gain 10% market share, but as one of the smaller players is has had to remain nimble in the marketplace.

In contrast, O2 was long the largest mobile network with 26% market share, but the joint venture between Orange and T-Mobile to create EE in 2010 took that crown and is currently the largest network with 34% of the market. O2 has remained competitive, but its market share meant that it did not have to innovate and push for new types of contracts to entice consumers the way Three has.

Merging O2 and Three will mean that the UK will lose Three as its scrappy underdog in the market, and that will only be bad for consumers, with an industry that once had five networks would be suddenly down to just three. With such low competition, one would hope that the Competition and Markets Authority would get involved and prevent a merger that would result in one company having a dominant 41% of the market. However, as no-one intervened to prevent the EE merger, it is unlikely that intervention will happen here either.

Competition keeps prices down and forces innovation, and having three companies own all of the UK’s mobile infrastructure is the exact opposite of that. MVNO’s like Tesco Mobile and Virgin Media may offer some competitive deals, but they piggyback on the others’ networks and as such can be priced out of the market with wholesale price rises at any time.

We need more competition, not less, if the UK wants to remain competitive in an increasingly connected world, and an O2/Three merger would be bad for all of us.

Photograph by DeclanTM

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