CMA says Cellnex purchase of CK Hutchison towers would harm competition
By Josh White
Date: Friday 17 Dec 2021
(Sharecast News) - The CMA has provisionally found Cellnex's proposed purchase of CK Hutchison's telecoms towers would harm competition.
It said the proposed deal, in which Cellnex has agreed to buy CK Hutchison's UK passive infrastructure assets, formed part of a broader set of transactions worth £8.6bn involving the sale of CK Hutchison's assets in a number of European countries.
Passive infrastructure assets include 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.
The Competition and Markets Authority launched an inquiry into the proposed deal in May, referring it for an in-depth investigation by an independent inquiry group in July.
At present, Cellnex is one of two large independent suppliers of passive infrastructure in the UK, having established a "market-leading position" through the acquisition of the telecoms division of Arqiva last year.
The only other supplier with a similar presence is Cornerstone Telecommunications Infrastructure (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 earlier this year.
Like many telecoms operators, CK Hutchison - which operated the Three mobile network - had historically used its passive infrastructure assets mainly to service its own telecoms business but, in recent years had considered how to commercialise the assets, including by selling them to an independent infrastructure supplier.
The commercialisation of the assets was 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 said it had 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.
The regulator said the evidence showed that CK Hutchison had a range of options to commercialise the assets, and that the deal with Cellnex was not the only option available to it to pursue its broader commercial objectives.
Its investigation provisionally found that the sale of the CK Hutchison business to Cellnex could raise "significant" competition concerns.
In particular, the sale of the business to Cellnex, rather than an alternative buyer, could 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.
That could 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 said it had 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.
It said it was concerned that 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.
"Mobile phones are an essential part of everyday life for people and businesses," said Richard Feasey, chair of the independent inquiry group.
"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 was now inviting submissions on its provisional findings by 14 January, and its notice of possible remedies, which sets out potential options for addressing its provisional concerns, by 7 January, ahead of a final decision by 7 March.
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