January 25, 2016 / 8:08 PM / in 3 years

French telecoms group Iliad eyes UK's mobile market - source

(Reuters) - French telecoms billionaire Xavier Niel’s Iliad (ILD.PA) could seek to enter the British market if the planned acquisition of O2 UK by local rival network operator Three creates an opening, a person familiar with the situation said.

The logo of French low-cost telecoms provider Iliad is pictured during the company 2013 annual results presentation in Paris March 10, 2014. REUTERS/Jacky Naegelen

Iliad’s interest in Britain, first reported by the Financial Times, would depend on the outcome of the European Commission’s investigation into the 10.5 billion-pound O2-Three deal and whether the two operators will need to sell assets in order to get it approved.

A person familiar with the situation confirmed that Iliad was monitoring the case and would look at any conditions imposed by Brussels.

Founded and majority-owned by Niel, Iliad’s Free sparked a price war with its move into the French mobile market in 2012, forcing larger rivals to cut costs to cope.

The British telecoms market is already seen as highly competitive, with relatively low costs and margins prompting a wave of consolidation as operators seek to meet the booming demand for superfast mobile and fixed line broadband services.

Britain’s biggest fixed-line group BT (BT.L) has just got the go-ahead to proceed with its acquisition of the country’s biggest mobile network operator EE from Orange (ORAN.PA) and Deutsche Telekom (DTEGn.DE) but the deal between O2 and Three is seen as posing greater problems for regulators as it could take the market from four mobile network operators to three.

The EC investigation is due to be completed by April 22.

The merged company formed by the O2-Three deal would own half of Britain’s most attractive radio spectrum in the low-frequency bands which give operators greater reach for their services, according to Moody’s. It would also own 37 percent of the spectrum in the higher-capacity high-frequency bands above 1800 megahertz.

Brussels could order Telefonica’s (TEF.MC) O2 UK and Three, owned by CK Hutchison (0001.HK), to shed some assets in order to create a new competitor, or guarantee access to its network for smaller rivals to launch new services as mobile virtual network operators (MVNOs).

A spokesman for British telecoms regulator Ofcom said it “does not discuss whether it had or had not held meetings with companies”. Iliad declined to comment.

EU regulators have recently been of the view that merging network operators in a particular national market could damage competition.

Last year European Competition Commissioner Margrethe Vestager scuppered a deal between TeliaSonera TLSN.ST and Telenor (TEL.OL) in Denmark over concerns that it could lead to higher prices for consumers, the first such deal to have been blocked since telecoms companies began buying their rivals in national markets three years ago.

Reporting by Ankush Sharma in Bangalore and Mathieu Rosemain in Paris; Editing by Kate Holton and Greg Mahlich

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