Four into Three can’t go: this mobile merger doesn’t add up

Outlook

The squillionaire owner of Three, Canning Fok, has pledged to freeze the price of texts, voice minutes and megabytes for five years if his mobile carrier is allowed to buy O2.

But it’s a promise that, if you’ll forgive the pun, rings hollow. Mobile charges are falling anyway and have been for years; most companies now offer unlimited texts and calls anyway, so you can’t compare. Furthermore, there’s nothing in Mr Fok’s pledge to stop him ramping up prices ahead of his five-year freeze. Only last week Three told up to 1 million customers it was moving them off “legacy” tariffs and on to new ones that would double their monthly bills to £30.

Far more important than what Mr Fok did say in his open letter was what he didn’t. Namely, how can he rip up all the current network-sharing deals with his rivals and rearrange them without it either costing a fortune or disrupting customers?

The problem is this: to offer the widest coverage for the lowest cost, the four big phone companies currently share access to each other’s networks. Three has a deal to share with EE and O2 with Vodafone.

You can see the problem: if Three merges with O2, it will have to untangle O2’s sharing deal with Vodafone and its own partnership with EE. These deals are long-term and complicated, involving combined engineering and financing of mast towers and other infrastructure.

Untangling them would be potentially difficult in terms of engineering, and costly in time and money.

Having already formed the partnerships and won all those savings in time and investment, how can it possibly be in the industry or public’s interests to undo them all now and start again?

Along with Mr Fok’s price pledge, he also fired a broadside at the British regulator, Ofcom’s Sharon White, for wading into the argument this week about whether the deal should get the green or red light. After all, Mr Fok said, it’s not in her gift (European regulators are in charge), and she’s not heard his side of the story.

His bombast won’t scare her, though; the former Treasury brainbox isn’t the type to be bullied by a billionaire. Nor is her oppo in Europe whose decision it is, Margrethe Vestager. She is currently kicking Google’s backside over its non-existent Irish tax bill.

For Ms Vestager, the question is simple: when has a reduction from four to three suppliers ever been good for customers?