The European Union on Wednesday blocked the takeover of Telefonica's O2 mobile operator in Britain by CK Hutchison Holdings, which owns the network Three, saying the merger would leave British consumers with higher prices and less choices.
"In the mobile telecoms market, effective competition ensures fair prices, quality networks. It spurs innovation," EU Competition Commissioner Margrethe Vestager said in Brussels.
""We want consumers to ... enjoy better services and affordable mobile packages to suit their needs," she added. "Allowing Hutchison to take over O2 at the terms they proposed would have been bad for UK consumers and bad for the UK mobile sector."
The takeover had been valued at some 10.5 billion pounds (15.1 billion dollars). O2 is the second-largest mobile operator in Britain by revenues and the largest by subscribers. Combined with Three, it would control more than 40 per cent of the market, Vestager said.
The merger would have left only three mobile operators on the British market and given the new entity insight into its competitors' network plans, since mobile networks are shared in Britain.
"This is not a healthy state of competition, not for the competitors and not for consumers," Vestager argued.
Hutchison said in a statement that it was "disappointed" by the European Commission's decision and that it would consider whether to pursue "a legal challenge."
The Hong Kong-based conglomerate argued that the takeover would have had "major benefits" by unblocking investment into digital infrastructure, as well as enhancing network capacity and speeds.
But Vestager said she has yet to see any "compelling evidence" that telecom mergers are necessary to ensure profitable operations and investments in networks.
The rejection by the commission, the EU's executive, comes at a politically sensitive time in Britain, with voters set to decide in six weeks whether their country should remain in the European bloc.
Vestager said that political considerations had not played a role in the decision by the commision, which is tasked with enforcing the EU's strict competition laws.
"This decision is 2.56 kilogrammes. I weighed it myself. It's a very heavy decision. It's a lot of work that goes into this," Vestager said. "We cannot let politics interfere with it, and eventually it will have to stand up in court if someone wants to challenge this decision. And the court doesn't want to hear about politics."
She also rejected suggestions that the commission is set on rejecting mergers in the mobile phone market, saying that every case will be judged on its own merits.
Hutchison had made a series of promises on prices, investment and competition in a bid to get the takeover approved, but the commission said the remedies offered were not sufficient.
It could have been swayed by a fourth mobile operator being allowed to replace Three or O2 in one of the network sharing agreements, but Hutchison did not want to pursue that approach, Vestager said.
The telecoms company said it is now focusing on getting EU approval for another merger it is planning in Italy, between its 3 Italia mobile operator and the company Wind.
The Spain-based Telefonica, meanwhile, said in a statement that it was sticking to its financial objectives despite the failed merger.
Its president, Jose Maria Alvarez-Pallete, had said a day earlier that an EU rejection would be "bad news." Telefonica had been hoping to use the earnings from the merger to cut down its debt, which had reached about 50 billion euros by the end of 2015.