CMA launches Vodafone-Three merger investigation

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The UK’s competition regulator has opened an in-depth investigation into Vodafone’s proposed merger with rival mobile network Three over concerns the deal could lead to higher bills for consumers.

The Competition and Markets Authority (CMA) said it will assess whether combining two of the country’s biggest telecom providers will negatively impact competition and choice in the market.

Concerns about the merger have been raised by Unite the Union. The union estimates that bills will surge by up to £300 annually if the merger is approved.

The UK currently boasts four major mobile operators: Vodafone, Three, EE (a part of BT), and Virgin Media O2. The CMA has urged third parties, including other network operators, to provide their perspectives on how the proposed merger might impact competition.

Sarah Cardell, Chief Executive of the CMA, said: “This deal would bring together two of the major players in the UK telecommunications market, which is critical to millions of everyday customers, businesses and the wider economy.

“The CMA will assess how this tie-up between rival networks could impact competition before deciding next steps.”

Under the terms of the deal announced last year, the combined Vodafone-Three business would become the UK’s largest mobile operator with around 27 million customers.

Robert Finnegan, CEO of Three UK, commented: “By combining networks, Three UK and Vodafone UK will unlock £11 billion of investment that will help the UK close the 5G gap with leading European countries and realise its ambitions to be a front-runner in digital connectivity. Thanks to this transaction, 95 percent of the population and every school and hospital will be covered by standalone 5G by the end of the decade.

“Joining forces will also yield more immediate benefits. From day one, our customers will enjoy faster, more reliable coverage over more of the country – and without paying a penny extra.”

However, the CMA said there are worries it could still lead to a worse outcome for consumers over time. The watchdog now has 40 working days to complete the first phase of its investigation before deciding if a more in-depth review is needed. It has asked third parties, including other network operators, to submit their views on how the Vodafone-Three deal could affect competition in the market.

Alex Haffner, competition partner at UK law firm Fladgate, said:

“The merging parties have already been speaking to the CMA for some time about the evidence it will need to be able to assess the competitive impact of the proposed tie-up between Vodafone and Three. Doubtless those initial conversations will have given the parties some measure of understanding as to how the amenable the CMA is likely to be to arguments that a four-to-three merger in the mobile telecoms market need not be of significant concern and whether CMA will adopt a similar course to other competition regulators who have cleared such transactions in recent years.

However, it has also been clear for some time that the proposed merger will also have an additional regulatory dimension under the National Security and Investment act given Three’s links to China via its Hong Kong ownership (and the impact of China’s national security law in Hong Kong). This allied to the UAE company e&’s recent 14.6% stake in Vodafone which has already undergone a security review by UK government under the Act means that the merging parties now face high level governmental as well as regulator scrutiny of the deal.”  

The CMA has powers to block mergers or demand concessions from companies to address competition or national security concerns.

(Photo by Emiliano Vittoriosi on Unsplash)

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