Virgin Media O2 boss slams BT’s ‘backroom deal’ to buy TalkTalk
Key Points
- Virgin Media O2 has urged for the government to allow a transparent CMA investigation into BT's deal to buy TalkTalk
- CEO Lutz Schüler slammed the handling of the acquisition as a 'backroom deal' being rushed through.
- He warned of BT's market dominance which would only increase with the acquisition of TalkTalk's customer base and wholesale business.
- Schüler also warned the government that the broadband sector was unstable, and that mishandling competition concerns could send the wrong message to investors.
Virgin Media O2 CEO Lutz Schüler has slammed BT’s deal to buy TalkTalk out of administration, saying he is concerned the ‘backroom deal’ is being rushed without proper scrutiny.
At the beginning of October, BT announced that it would buy TalkTalk out of administration, taking on its 2.5 million customers. The deal raised competition concerns amongst rivals and regulators, as BT, which owns Openreach, already holds a substantial market share.
Last week, the Competition and Markets Authority (CMA) delivered a report to the Secretary of State on the competition impacts of this deal, but there has not been any public statement from government on that report.
“This void serves only to exacerbate our concerns that this is a backroom deal being rushed through, bypassing any meaningful review by competition regulators – a process which other proposed deals in this sector have been rigorously subjected to in recent months,” Schüler said.
“Here, the law is quite literally being changed to pave the way for this transaction through an amendment to the Enterprise Act to create a new public interest criteria.”
“You don’t need to be a hardened economist or lawyer to know that BT buying TalkTalk must surely raise competition concerns, so I want to be very clear: any deal that allows a dominant incumbent to further tighten its grip on the market and acquire one of its largest customers and closest competitors must be thoroughly scrutinised,” he said.
Virgin Media O2 previously called the handling of the transaction a ‘stitch-up’, after the Department for Digital, Culture, Media and Sport (DCMS) announced Nandy had issued a Public Interest Intervention Notice in relation to the deal.
That notice allows Nandy to weigh the wider public interest now that the CMA has reported to the government on its competition concerns.
VMO2 calls for detailed investigation
Schüler has now written again to Nandy to urge transparency over the government’s handling of this transaction and saying that the public interest justification for the notice intervention is no longer necessary. He called for a full and transparent investigation by the CMA into the deal.
“Government must demonstrate that BT’s ownership is necessary on a permanent basis, rather than merely convenient, that other credible alternatives were considered, and that the CMA’s report – which almost certainly recommends a detailed review of the potential impacts on competition – is informing the final decision and was not just a paper exercise,” he said.
“BT has dominated the wholesale market for decades and is the largest retail broadband provider in the country. Should this acquisition of one of its closest competitors be waved through, BT’s market power will be further enhanced with less incentive to compete.”
Schüler said TalkTalk’s collapse and the pressure on altnets across the country are a worrying reflection of the UK broadband market’s instability.
He warned that mishandling of competition concerns could hinder international investment and lead to a potential dilemma for connectivity providers who are in trouble.
“If competition concerns can be put aside when a connectivity provider faces financial collapse, is the lesson for investors here to just wait for insolvency before attempting to acquire a struggling provider?” Schüler said.
“I’m not convinced ‘we’ll solve it when insolvent’ is the bumper sticker business Britain is looking for.”
