REG - Competition and Mkts - UK telecoms tower merger risks higher mobile costs

Cellnex Telecom SAAnnouncement

16/12/2021 17:30

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RNS Number : 9298V  Competition and Markets Authority  16 December 2021

UK telecoms tower merger risks higher mobile costs

 

The CMA has provisionally found Cellnex's proposed purchase of CK Hutchison's
telecoms towers would harm competition.

 

Cellnex is an independent supplier of telecommunications infrastructure,
currently active across several European countries. CK Hutchison is a
multinational conglomerate that currently owns and operates the Three mobile
network in the UK.

 

The proposed deal, in which Cellnex has agreed to buy CK Hutchison's UK
passive infrastructure assets forms part of a broader set of transactions -
worth £8.6bn (€10bn) in total - involving the sale of CK Hutchison's assets
in several European countries. Passive infrastructure assets are structures,
such as towers and masts, that mobile network operators and other wireless
communication network providers attach electronic equipment to in order to
operate their networks. This includes the sites that the structures are built
on.

 

The Competition and Markets Authority (CMA) launched an inquiry into the
proposed deal in May 2021 and it was referred for an in-depth investigation by
an independent inquiry group in July.

 

At present, Cellnex is one of only two large independent suppliers of passive
infrastructure in the UK, having established a market-leading position through
the acquisition of the telecommunications division of Arqiva in 2020. The only
other supplier with a similar presence is Cornerstone Telecommunications
Infrastructure Limited (CTIL), a Joint Venture between O2 and Vodafone that
was originally set up to provide services for its parent companies but became
an independent supplier in early 2021.

 

Like many telecoms operators, CK Hutchison has historically used its passive
infrastructure assets mainly to service its own telecoms business but has, in
recent years, considered how to commercialise these assets, including by
selling them to an independent supplier of telecommunications infrastructure.
The commercialisation of these assets is intended to help CK Hutchison pursue
its broader commercial objectives, including contributing to funding the
development of its UK mobile network.

 

Having reviewed a range of evidence in relation to CK Hutchison's internal
decision-making, the CMA has provisionally found that, if the deal with
Cellnex had not been agreed, then CK Hutchison's passive infrastructure assets
would most likely have been sold to an alternative buyer. This evidence shows
that CK Hutchison had a range of options to commercialise these assets and
that the deal with Cellnex was not the only option available to it to pursue
its broader commercial objectives.

 

The CMA's investigation has provisionally found that the sale of the CK
Hutchison business to Cellnex may raise significant competition concerns. In
particular, the sale of this business to Cellnex, rather than an alternative
buyer, may prevent the emergence of a third major national player - instead
leaving a duopoly in which Cellnex and CTIL would account for over 90% of the
market. This may materially reduce competition to supply the infrastructure
requirements of mobile networks in future contract negotiations, running the
risk of those networks facing higher prices and more onerous contracts.

 

As a result, the CMA has provisionally concluded that the sale of CK
Hutchison's assets to Cellnex, rather than to an alternative buyer, would lead
to a substantial lessening of competition. The CMA is concerned that this
could result in higher prices or lower quality services for mobile network
operators, with a knock-on adverse impact for users of mobile networks across
the UK.

 

Richard Feasey, Chair of the independent inquiry group, said:

 

"Mobile phones are an essential part of everyday life for people and
businesses. This deal may prevent the emergence of a third major national
provider of the critical infrastructure on which mobile operators depend,
leaving them with only a choice of only two major suppliers. Less competition
could mean higher prices or worse terms for both mobile operators and their
customers."

 

The CMA is now inviting submissions on its provisional findings by Friday 14
January 2022 and its notice of possible remedies, which sets out potential
options for addressing its provisional concerns, by 7 January 2022, ahead of a
final decision by Monday 7 March 2022.

 

For more information, visit the Cellnex/CK Hutchison merger inquiry page
(https://www.gov.uk/cma-cases/cellnex-slash-ck-hutchison-uk-towers-merger-inquiry)
.

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