The Merging Of Three UK Plus O2 Likely Means Higher Prices For Consumers

I've already written about the proposed merger of Three with O2, especially as it follows the proposed takeover of EE by BT. These two deals follow a number of similar deals across Europe, where carriers are coming together as my two cats might on a cold evening. They're competitors right until it's beneficial to club together. One of the patterns that's emerging is the so-called "quad play," that is the combined forces of landline, mobile, broadband and TV contracts. These customer offers have been gaining traction with carriers as a way to retain customers and generate new income streams.

One of the concerns within the industry is that the acquisition of O2 by Three may well result in higher prices for customers, both consumer and business. How so? Put simply, less competition and history repeating itself. You see, Germany, Austria and Ireland all have three main carriers, too. It's too early to jump to any conclusions but we've already seen three carriers result in significant price increases in Austria where during the last twelve months, where the largest carrier Telekom Austria has increased smartphone tariff costs by 50%. And the Three / O2 deal hasn't yet been inked; Ofcom still have to run their due diligence and presumably will want to keep the UK market running with four operators rather than three, but this deal looks wrapped up except in the detail. An article carried by British newspaper, the Daily Telegraph, highlighted how Three's owner, Li Ka-shing, may see higher prices as compensation for a decade of losses from the Three network. This follows "paying over the odds" for the 3G licence in 2000. At the time, when Three launched their new network, they offered customers patchy coverage and bulky, inefficient handsets. The Three network was ahead of its time, but it took several years before customer demand caught up.

Meanwhile, what is to happen to the O2 brand? It's set to fade away. Statements on the O2 and Three websites state that "wherever the O2 logo once appeared, you will soon see the Three logo." There's also going to be no change to contracts of customer services, according to these statements. There are hints of improved coverage, "Over the next few months, we'll continue to invest in building a state-of-the-art 4G network which will ensure even better coverage right across the country." There's talk of increased broadband speeds, so perhaps Three and O2 are set to use multiple spectrum for higher performance LTE network. So, good news for customers that the networks are likely to be combined may be counterpointed by an eventual increase in prices, despite the £400 million of estimated cost savings to be made by combining the two carriers.

What of Vodafone? Fifteen years ago, Vodafone was the darling of the corporate world, having grown by acquisition across the world. Are they not an acquisition target? China Mobile, AT&T, Sprint and Softbank Mobile have all been linked with Vodafone. Vodafone's Chief Executive Officer, Vittario Colao, has already started that Vodafone would push towards consumer broadband if BT moved into mobile. This might mean a tie in with say Sky (who acquired O2's fixed line broadband), or Virgin Media. This is a deal that UK credit ratings agency Standard & Poor's have foreseen. I believe it'll be an interesting twelve to eighteen months: it'll take this long for plans to come to fruition. We'll know more about the branding, networking, retail stores presence in the coming weeks and months. Meanwhile, if you're a UK customer, you might want to carefully consider your upgrade options in the next twelve months. It could be time to switch to a SIM only plan and start buying your devices unlocked from the manufacturer.

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About the Author
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David Steele

Senior Staff Writer
I grew up with 8-bit computers and moved into PDAs in my professional life, using a number of devices from early Windows CE clamshells and later. Today, my main devices are a Nexus 5X, a Sony Xperia Z Tablet and a coffee cup.
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