Three and O2: The EU Commission won’t be rushed - but there will be change

Last week the UK Competition and Mergers authority made it clear that they would not back the merger between Three and O2, citing that it would reduce competition in the UK market. The EU Commission is not being drawn and has given a deadline of 23rd May for a decision, which has become more politicised given its proximity to the Brexit vote in June. What’s clear is that if it goes ahead O2 and Three will need to embark on major change programmes to unite the infrastructure, sell off spectrum and assets as part of a “remedy”, and align their brands. If it’s given the kibosh they will have to commit to reinvigorate the individual brands and no doubt invest in 4G through to CRM platforms that will differentiate them in the market.  Either way it won’t be pretty.

All this against a backdrop of BT’s EE buy out. Much for the regulators to think about, and no doubt the MVNOs in the market, including giffgaff and Tesco Mobile will be wondering their fate as a result of the decisions that are taken.  Then of course there’s Vodafone, who will be deep in strategy reviews as the bid for true quad-play pans out. If the merger is approved I can see that the network integration would be a quick win in terms of cost benefit and immediate consumer offerings. However, as with any merger there will be pressure, especially from shareholders, to strip out cost. That leads to the inevitable integration nightmare for the commercial directors as billing and CRM engines are notoriously hard to amalgamate. Many have been built by bolting on system after system - bringing two giant spaghetti junctions together is never appetising and I see this one being no different - especially if you add in the MVNO architecture that hangs on the coattails.  I should know, as we have helped many a utility, telco and financial services company rescue multi-million pound integration projects that have gone off the rails. Budgets have spiralled, skills have been misplaced and consumers have suffered as they fall off price plans that have kept them loyal for years.

Ultimately with so many stakeholders to please, the future for these brands boils down to one word - Assurance. The knowledge that everything that’s to be protected is, and better still, the enhancements promised from a merger come to fruition. The complex, careful planning that’s entailed in these sorts of mergers, is not for the faint hearted. It takes years of business acumen, knowledge of system integration but above all programme assurance skills that simply aren’t home grown. They don’t exist in-house and are brought in as a last resort. If these major mergers go through, that has to be turned on its head. Over the course of the year, we might help a FTSE100 spend £1billion wisely on transformation programmes. Typically these are the companies that are successfully delivering to the shareholder and the customer. They recognise their limitations and the cost of not embarking on the right road, and bring in the expertise that will not only help them navigate the integration with clarity and focus, but also coach and train their teams through the project. They avoid the resuscitation that we know all too well at Pelicam. Instead they save million and make millions as a result. The numbers speak for themselves. Around 40% of unassured programmes fail to deliver to time, cost and/or quality targets and a further 15% fail to deliver on any of those metrics. Naturally, the cost to put them right runs to millions, not to mention the brand damage. Neither brand involved here can afford the dent. It would be a rough start to a bright future especially as competitive edge is what these mergers are all about and to my mind they can only be achieved through a drive for assurance that’s second to none. 

Pelicam is leading the way for independent project assurance, where our focus is dedicated to delivering the programme in hand with professional expertise and coaching. Read how we have helped on major integration work here or contact us directly p.mayer@pelicam.com