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We have seen this one brewing for some time already, and now it appears to be bubbling over: the Hutchison-owned UK mobile operator Three is preparing an official submission to the EU against a proposed joint venture between the UK’s three largest mobile operators to enable mobile payments and other cross-operator services like advertising. Three was left out of the original discussions for the JV between Vodafone (NYSE: VOD), O2 and Everything Everywhere (itself a JV between T-Mobile and Orange).
The unnamed JV needs regulatory approval before moving ahead — and it has not yet actually applied for it, according to sources — but Shaun Gregory, who is now head of advertising for Telefonica (NYSE: TEF) new unit Telefonica Digital, told paidContent in September that the operators were already beginning to discuss informally how they would work together in future.
The JV, as laid out by the carriers, would cover not just mobile payments with technologies like NFC but also other areas like mobile advertising — in other words, commercial projects that require scale to get any currency with third parties.
Three believes the JV would effectively prevent it from competing in these commercial efforts in the future, and has laid out its position this week in a letter to regulators, which it has shared with paidContent (full copy below). We understand that Three plans to follow this up with a longer and more detailed submission next week.
When the operator partnership was first unveiled in June, it was apparent from the word go that Three was not involved. Three’s then-CEO Kevin Russell (who has since left the company) at the time noted that he had actually only been informed of the other operators’ intentions only 30 minutes before they announced the JV publicly.
When the operators first announced the JV, they maintained that final products would be there for other parties, including rival operators like Three, to use as well — but Three believes that by not being party to the actual JV, its bigger rivals will benefit more from the deal than it will.
Today’s letter follows on from a complaint by Three to regulators back in September. The difference is that earlier Three’s main gripe was about being excluded from the JV, which it saw as anti-competitive. Now that issue has grown.
“What our understanding is now is that the JV is akin to a joint selling arrangement. It’s not just about a group of operators getting together to help push a technical standard (NFC) or for ease of use, but about covering other aspects of mobile services,” he said. “Just think what it would mean for ad buyers and advertisers, and smaller newspapers, if News International, DMGT and Trinity Mirror (LSE: TNI) all combined their advertising sales operations.”
This week’s letter to regulators lays out as much: “The proposed JV seeks to exert complete control over commercial access to the single most important item in people’s lives: the mobile phone,” writes Stephen Lerner, general counsel for Three, who had also penned the letter to regulators in September.
Three is probably doing well by making its position clear as early as possible, but it remains to be seen whether the threat is real or simply a windmill on the horizon.
Nearly six months on, JV has yet to apply to the regulators for approval, and even if it does, the JV will actually need to work to pose a problem for Three. Operators have not exactly demonstrated a strong track record for collaborating on things like mobile commerce in the past. (Two past attempts, M-Pay and Simpay, both no longer exist.)
And that’s before one even considers whether a technology like NFC, or mobile operators, really will be at the center of any kind of mobile commerce revolution in the future.
We’ll continue to follow this one. For now, the full letter laid out below:
“The proposed JV seeks to exert complete control over commercial access to the single most important item in people’s lives: the mobile phone.
Deutsche Telekom (NYSE: DT), France Telecom (NYSE: FTE), Vodafone and Telefónica UK have set up a Joint Venture (JV) dressed as a collaborative effort to accelerate the adoption of the mobile wallet in the UK, but its real aim is to eliminate the prospect of competition in its development.
The ‘cooperation’ extends to the creation of a ‘one stop shop’, or central sales organisation for card issuers, advertisers and media agencies looking to put their cards and offers into the wallets of UK mobile subscribers. It is a cosy collaboration that would control nearly all mobile wallets in the UK and control and sell advertisers and card issuers access to its mobile subscribers.
This is anti-competitive and akin to a joint selling arrangement which creates a monopoly in several markets (including mobile push advertising and mobile payments) and should not be approved under any circumstances.
By controlling and selling access to over 90% of UK mobile subscribers and their data, Deutsche Telekom, France Telecom, Vodafone and Telefónica seek to foreclose the market to third-parties and neatly do away with the inconvenience of competing with each other.
It threatens to shunt the future of mCommerce onto the wrong track from the start. If allowed to proceed, the JV will damage the prospects of competition in the UK mobile market and the interests of UK mobile consumers.”