The UK’s Competition and Markets Authority (CMA) has released its provisional findings on the proposed merger between Vodafone and Three, highlighting potential concerns around competition and pricing. While the CMA has acknowledged the possibility of negative market impacts, it has also indicated that the merger could proceed under certain conditions, known as behavioral remedies, rather than structural remedies like asset divestment or the introduction of a new competitor.
These behavioral remedies would require Vodafone and Three to commit to specific actions, such as maintaining price protections and ensuring investment in the UK’s digital infrastructure, to mitigate the risk of harming consumers and the wholesale market. This approach aims to safeguard competition without demanding drastic structural changes.
Also Read: Vodafone-Three UK Merger Faces Regulatory Hurdles
Consultation Phase and Timeline
The CMA’s provisional findings mark the start of a consultation period, during which stakeholders, including rival telecom companies and consumer advocacy groups, can provide feedback on the proposed merger. The final decision is expected on December 7, 2024. Due to the timeline for the consultation and subsequent regulatory steps, it is now unlikely that the merger will be completed before the end of the year, pushing the deal’s closure into 2025.
This cautious approach reflects its role in balancing the merger’s potential benefits—such as significant investment in infrastructure and possible service improvements—with the risks of reduced competition and higher consumer prices.
Related: New Report Urges EU to Reconsider Stance on Telecom Mergers
Industry Reactions
Matthew Howett, Founder and CEO of the Telecom Consultancy Assembly, believes that the CMA’s decision to forgo structural remedies is a positive development for the companies involved. “It seems unlikely the CMA will reverse course on structural remedies at this stage, which is a positive sign for Vodafone and Three,” Howett commented. He further noted that Vodafone and Three are likely to accept behavioral remedies, especially around commitments to invest in infrastructure and to protect consumer pricing, as a condition of getting the deal approved. These types of remedies, he added, would not be deal-breaking for the two telecom giants.
Despite the progress, Vodafone and Three have expressed frustration with the CMA’s concerns. Robert Finnegan, CEO of Three UK, took to LinkedIn to describe the merger as a “once-in-a-generation opportunity” to enhance the UK’s digital infrastructure. He pointed out that the combined companies have committed to invest GBP 11 billion to build out the country’s mobile networks. “By all measures, the merger is pro-growth, pro-customer, and pro-competition. It can, and should, be approved by the CMA,” Finnegan stated, emphasizing his belief that the deal would benefit consumers and the broader economy.
Vodafone Group CEO, Margherita Della Valle, echoed this sentiment, describing the merger as a “catalyst for change” that could accelerate the growth and competitiveness of the UK’s telecom sector. She argued that the merger would free the companies to make necessary investments in 5G and other next-generation network technologies, enabling them to better compete in an increasingly challenging market. “The time has come to take off the handbrakes,” she said, calling the CMA to approve the deal.
Dario Betti, CEO of the Mobile Ecosystem Forum (MEF), highlighted the broader significance of the deal. He pointed out that the CMA’s findings raise important questions about the role of telecom services in society. “The real debate is not whether your phone bill will rise in the future (it likely will, given Europe’s low prices and the increasing demand for more complex technologies); instead, the question is: who will you pay for communication services? A mobile operator or an internet company?” Betti remarked.
Betti’s comments reflect a growing concern in the telecom industry about the long-term sustainability of traditional mobile operators in an environment where internet giants like Google and Amazon increasingly offer communication services that bypass the need for conventional mobile networks.
Behavioral Remedies in Focus
The primary focus of the CMA’s proposed behavioral remedies is to ensure that Vodafone and Three deliver on their investment promises and that consumers are not negatively impacted by price increases. This could include formal commitments to invest the GBP 11 billion promised by the companies and possible oversight by Ofcom, the UK’s telecom regulator, to ensure these investments are made on time.
In addition to investment commitments, the CMA may seek consumer protections in the form of price controls (at least temporarily). These could be designed to prevent Vodafone and Three from raising prices excessively in the immediate aftermath of the merger, particularly in the retail and wholesale markets. Mobile Virtual Network Operators (MVNOs), which rely on Vodafone and Three’s networks to offer services, could also benefit from such protections.
Matthew Howett speculated that Vodafone and Three might resist some of these conditions but would ultimately accept them if necessary to secure approval. “The red line would have been structural remedies, but with that off the table, I think they will accept behavioral conditions like investment commitments and temporary price controls, especially if it means getting the deal done,” Howett explained.
Many industry experts see the Vodafone-Three merger as a bellwether for the broader European telecom market. With increasing pressure on telecom operators to invest in costly infrastructure upgrades—such as 5G and fiber networks—consolidation is becoming more common across the continent. The CMA’s decision regarding this merger will set a precedent for future deals in other countries.
