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September 27, 2016updated 05 Oct 2016 4:47pm

How Brexit will change the UK telecoms market

Mobile mergers and BT regulation: will leaving the Brussels orbit change the UK telecoms market?

By Alexander Sword

The extent to which the European telecoms market influences the UK market has been fairly evident recently, with major deals such as the Three-O2 merger being scuttled by EU regulators.

Holiday-makers may have felt the benefits of other EU-wide regulation this summer as international roaming charges were cut across the EU for the first time before they are phased out completely next year.

But how, if at all, will the UK’s recent referendum vote to leave the EU change any of these factors?


Margrethe Vestager has taken a hardline on telecoms mergers.

As the Three-O2 example demonstrates, EU regulators have not been afraid to exercise control over the UK telecoms market. The European Commission’s Competition Commissioner Margrethe Vestager ruled that Three owner Hutchinson Whampoa’s acquisition of the Telefonica-owned O2 would have negative impacts on UK consumers in terms of prices and innovation.

The Competition and Markets Authority (CMA), the UK’s domestic competition regulator, and Ofcom, the local communications regulator both explicitly supported the EC’s eventual decision before the fact.

The CMA had in fact pushed to be able to rule on the case in the Three-O2 deal.

Generally, cross-border deals of this size are examined by Brussels regulators unless at least two-thirds of the business of both parties are conducted in the state in question. The CMA applied for an exception to this trend, due to the importance of the deal, which would reduce the number of big mobile operators in the UK from four to three.

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Three O2

A merger between Three and O2 was blocked by the European Commission.

In the end who ruled on the case appears to have been irrelevant: the CMA unequivocally calling on Brussels to block the merger would seem to suggest that broadly the UK regulators were fairly aligned with EU counterparts.

There is, however, no guarantee that this will always be the case, and depending on the deal that the UK strikes with the EU upon leaving, where there are differences the final say may now be in the hands of UK regulators.

Kester Mann, Principal Analyst at CCS Insight, wrote that in regulatory terms, Brexit might provide an opportunity to tailor policy “more specifically to the UK’s individual characteristics.”

For example, Ofcom might take the opportunity to separate Openreach from BT if BT loses the option to appeal to Brussels.

Rob Bratby, Telecoms Partner at TMT law firm Olswang, expects limited changes in terms of regulation, as European telecoms regulatory rules were heavily influenced by the UK anyway.

“In any event are underpinned by WTO commitments which will continue to apply to both EU and UK even in the event of a hard Brexit,” he adds.

What about the benefits of the single market? Many industry insiders are fairly blasé about Brexit’s impact here.

Bratby says that unlike industries such as financial services, UK telcos do not rely on the UK’s membership of the EU to sell services to Europe.

James Gray, founder of GrayStone Strategy and the former Vodafone employee involved in launching several of the network’s virtual operators, also says that it is unlikely a new trade deal will be required to tap into the benefits of the EU Single market.

He says that legislation is quickly rendered out-of-date by the fast-moving digital markets, meaning that “we have the potential to maintain a digital economy by simply continuing to develop and sell across borders, after all the internet has no borders so it has to be turned to our advantage.”

One acknowledged potential shortfall from leaving the EU is in terms of skills, however.


PM Theresa May will define the UK’s direction after Brexit.

If freedom of movement is a casualty of the Brexit negotiations, which from Prime Minister Theresa May’s rhetoric seems likely, then the UK’s high-tech industries, including telecoms, will need to ensure they can recruit the staff they need either domestically or from abroad.

Gray says that the UK must “invest in the right skills, skills that we have been importing from the EU and beyond.

“Now is the time to put in place the hot houses and training schemes that will retain employees and grow skills within the home country at large and within individual businesses to ensure that we can weather the Brexit challenge.”

Finally, on roaming charges, UK customers may once again be subject to roaming charges within the EU once Brexit takes place.

This of course depends strongly on the competitive dynamic amongst operators, since some


Three’s Feel at Home offer is available in 42 destinations.


Since 1 September, Three customers have been able to use their mobile phone package abroad at no extra cost through the Feel at Home offering in 42 countries.

Vodafone also launched an inclusive roaming package across 40 destinations in May. Customers of Vodafone’s Pay Monthly Red and Red Value bundles can use unlimited calls, texts and picture messages with a monthly data allowance of up to 4GB. The new countries covered include the EU as well as Turkey, six Caribbean islands and Switzerland.

All-in-all, the impacts of Brexit on telecoms may be fairly minor, although it will be impossible to say more until the Government reveals more about its plans.

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