Vodafone UK and Three UK are facing significant regulatory hurdles from Britain’s Competition and Markets Authority (CMA) over their proposed merger. The CMA’s provisional findings raise concerns that the merger, which aims to combine Vodafone’s British mobile operations with those of Three UK—owned by Hong Kong-based, CK Hutchison—could substantially reduce competition in the UK mobile market.
According to the CMA’s independent inquiry, the merger could lead to higher prices for mobile customers, smaller data packages, or reduced service offerings. The regulator is concerned that these changes could disproportionately affect lower-income customers and those who may not benefit from network quality improvements. The merger, announced in June last year, seeks to create the UK’s largest mobile operator with 27 million customers and accelerate the rollout of 5G technology, with a projected value of GBP 16.5 billion (USD 22 billion).
Additionally, the CMA noted that the merger could negatively impact wholesale telecom customers, such as MVNOs like Lyca Mobile and Sky Mobile, by reducing the number of network operators from four to three. Despite these concerns, the CMA acknowledged that the merger could potentially enhance network quality and accelerate 5G deployment, though it deemed these benefits overstated.
The CMA will now consult on its provisional findings and consider potential remedies to address its concerns before reaching a final decision by mid-December. Remedies include legally binding investment commitments and measures to protect retail and wholesale customers. Responses to the CMA’s provisional findings are due by October 4, 2024, with potential remedy submissions required by September 27, 2024.
Vodafone and Three UK disagree with the CMA’s provisional findings, asserting that the merger will drive growth, benefit customers, and enhance competition.
Vodafone CEO, Margherita Della Valle, emphasized, “Our merger is a catalyst for change; it’s time to take off the handbrake on the country’s connectivity and build the world-class infrastructure it deserves. We offer a self-funded plan to propel economic growth and address the UK’s digital divide. Great network connectivity is a critical enabler of so many elements of our daily life and is central to the prospects of so many sectors. Large and small businesses depend on it, enabling new industries—like AI—to thrive. It facilitates a steep change in productivity and care across the public sector and lies at the heart of every nation’s future prosperity.”
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Industry Reaction and Future Outlook
Kester Mann, Director of Consumer and Connectivity at CCS Insight, commented, “At first glance, the CMA’s concerns make for uncomfortable reading for Vodafone and Three as they battle for approval for their crucial merger. However, many had been outlined previously, notably, the potential for higher prices and likely impact on the wholesale market. The main knockback to the merging parties is that the CMA considers claims of superior network quality post-integration to be ‘overstated’.”
He continued, “The CMA offers a potential path to approval through various remedies. Crucially, it appears willing to consider ‘behavioral remedies’ such as enhanced network access for virtual providers or safeguards for retail customers. This is significant as many had feared that more onerous ‘structural remedies’—such as selling assets or supporting a new entrant—would be required. In this sense, Vodafone and Three should be encouraged by the tone of the CMA’s report, which appears more open to the merger than I was expecting.”
Mann concluded, “The ball is now firmly back in the court of Vodafone and Three. They need to quickly assess these proposals and make further suggestions ahead of a final deadline in early December. The next three months may prove to be the most pivotal in the history of the UK telecoms sector. I believe that approving the merger would be the best outcome for the future of the UK mobile industry. A combined Vodafone and Three can make more efficient investments and push BT and Virgin Media O2 to raise their game, boosting the market’s long-term connectivity credentials.”
The inquiry group, led by Stuart McIntosh, is committed to thoroughly reviewing responses to its provisional findings and considering proposals for mitigating the merger’s negative impacts, while securing its potential benefits. Their dedication to this process should reassure stakeholders of their commitment to a fair and balanced decision.
