A European mobile wallet venture led by telecommunications operators has run into a setback.

It’s called “Project Oscar” in Europe, but unlike the Isis telco-led mobile wallet partnership in the U.S., the overseas telco joint venture for creating a mobile wallet and a general clearinghouse for mobile payments must gain European regulators' approval in order to move ahead.

European Commission on April 16 announced plans to conduct an in-depth investigation of the joint project proposed last June by Telefónica UK, Everything Everywhere Ltd. (T-Mobile and Orange parent), and Vodafone UK (see story). 

The telcos serving the United Kingdom and other parts of Europe proposed a venture in which each company would provide startup funding to create a program utilizing Near Field Communication technology for a mobile wallet.

 The companies said the venture's key goal was to create a single mobile-commerce “ecosystem” that would serve advertisers, banks and retailers in a growing mobile payments market.

That sort of rhetoric apparently spooked Hutchison 3G UK Ltd., known as Three, a UK-based mobile payment provider whose executives reportedly informed the commission that the venture would stifle competition by creating a monopoly, observers say.

It is likely that Three raised some legitimate concerns and the fact that the commission put the brakes on the project demonstrates the complexity of the region’s payments regulations, Zil Bareisis, a London-based senior analyst for research firm Celent, tells PaymentsSource.

“There are many issues to consider when approving new entities, such as the proposed Oscar partnership, and Three has likely done a good job of showing concerns about being excluded,” Bareisis adds.

The European Commission will conduct its investigation under the European Union’s merger regulations. Press reports in March noted that the commission’s initial study of the joint venture revealed the companies involved had the technical and commercial capability as well as the “incentive” to block future competitors from offering their own mobile wallet services in the UK.

Neither the commission nor the European Union mentioned the specific concerns of Three in its reports or press briefings of the past month.

Lack of insight into the commission's investigation, let alone what its eventual ruling would determine, may only fuel speculation for the time being, Gareth Lodge, another London-based industry analyst with Celent, tells PaymentsSource.

At its heart, the tussle likely centers on which factions will ultimately control technology that will link a mobile wallet to the consumer, Lodge suggests.

“The banks, the card companies, Google, they are all fighting over this, and Three, probably quite rightly, thinks that they’ll be at disadvantage if they don’t stop it,” Lodge says.

One possible scenario could involve the companies in the joint venture providing the focus and attention to make a mobile wallet network work, rather than regulators trying to accomplish the same by establishing a committee to oversee mobile payments, Lodge contends.

But the European Commission may view mobile payments as something that should be designed to reach all consumers and should include all companies providing telecom services, he adds.

Lodge also notes that Three, which claims to be the fastest-growing mobile network in the UK, initially expressed interest in joining the new mobile-wallet partnership, but then backed off and now appears to be playing a role in halting it.

Executives from telecommunications companies involved in Project Oscar and representatives for the European Commission could not be reached for comment.

Three’s reaction to the venture could indicate the company is simply afraid it will miss out on some type of gold rush, Lodge speculates. More importantly, how the Project Oscar team reacts to an eventual ruling by regulators will provide the real test for the future of the mobile payment initiative, he adds.

The commission has until late August to make a final decision on whether the proposed venture would affect competition in the European Union, Dow Jones reported April 16.

The mobile operators involved in the joint venture remain confident that regulators will eventually approve Project Oscar, Dow Jones reported.

In the U.S., AT&T Mobility, T-Mobile USA and Verizon Wireless announced a joint venture in November, 2010 called Isis for the similar purpose of establishing a mobile payments network (see story). 


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