The CMA has referred BT Group’s anticipated acquisition of EE Limited for an in-depth phase 2 investigation.
BT and EE are, respectively, the largest suppliers of fixed communications services and mobile communications services in the UK. BT also provides many fixed services to other communications providers, including backhaul services to mobile communications providers, such as EE, O2, Three and Vodafone. These services connect their radio masts to their core network. EE also provides wholesale mobile services to other mobile service providers.
BT submitted a request for a fast track reference to a phase 2 investigation on 15 May 2015. The Competition and Markets Authority (CMA) commenced its phase 1 investigation on 18 May 2015 and issued an ‘invitation to comment’, seeking views on this request.
For a case to be fast-tracked, the CMA must have evidence that it believes objectively justifies a belief that the test for reference to phase 2 is met.
The CMA has found that the transaction meets the test for reference in that it gives rise to a realistic prospect of a substantial lessening of competition in relation to the supply of wholesale access and call origination services to mobile virtual network operators and fibre mobile backhaul services to mobile network operators in the UK. It has therefore decided that it is appropriate to proceed with a fast track reference of the merger to phase 2.
Significant competition concerns were raised during the consultation regarding the impact of the merger on other markets, including the retail mobile market in the UK, but, given that the criteria for a fast track reference were met on the basis of the 2 issues identified above, it was not necessary for the CMA to reach a conclusion at phase 1 in relation to these other concerns.
Third parties will now have an opportunity to present their views on the merger during the phase 2 investigation which will be overseen by a group of independent panel members. The phase 2 investigation will not be restricted to investigating the 2 issues mentioned above.
Andrea Coscelli, CMA Executive Director of Markets and Mergers and decision-maker in this case, said: “BT and EE are leading suppliers of UK telecommunications services and together they will have a strong presence in many telecommunications markets. They also supply important inputs at the wholesale level, which enable other communications providers to compete at the retail level in the provision of mobile services. We have found that there is a real risk that the merger could reduce their incentives to supply these inputs and that this could have a detrimental impact on the retail mobile market. BT and EE have recognised that the issues in this case are complex and that the test for reference at phase 1 would be met. They therefore requested use of the fast track procedure and, after due consideration, we believe this to be appropriate.”