Last year, Vodafone and Three UK had announced a deal to merge their operations
The proposed merger between U.K. telcos Vodafone and Three could lead to higher prices for customers and affect investment in local mobile networks, according to the U.K.’s Competition and Markets Authority (CMA).
Last year, Vodafone UK, which is owned by Vodafone Group and Three UK, owned by CK Hutchison Holdings had announced a new joint venture agreement which would bring their operations under a single network provider. Under the terms of the proposed merger, Vodafone will own 51% of the new entity while Hutchison Group will own 49%. If the transaction is approved, the new entity will reach 99% of the U.K. population with 5G Standalone (SA) networks.
The CMA launched the initial phase of an antitrust investigation in January after the entity was notified by the two carriers about the proposed merger. This initial review is designed to identify whether the deal may lead to a ‘substantial lessening of competition’ and therefore requires an in-depth, phase 2 investigation. Phase 2 investigations allow an independent panel of experts to probe in more depth initial concerns identified at phase 1, the CMA explained.
The CMA highlighted that it has concerns that the deal, which combines two of the four mobile network operators in the U.K., could lead to mobile customers facing higher prices and reduced quality.
“The CMA’s Phase 1 investigation found that Vodafone UK and Three UK provide important alternatives for mobile customers. Both have made significant investments in their networks in recent years – which includes the rollout of 5G. Three UK is also generally the cheapest of the four mobile network operators,” the entity said.
“The CMA is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers. Competitive pressure can help to keep prices low, as well as provide an important incentive for network operators to improve their services, including by investing in network quality,” it added.
It also raised concerns the merger may make it difficult for smaller MVNOs including Sky Mobile, Lebara and Lyca Mobile to negotiate good agreements for their own customers.
Julie Bon, Phase 1 decisionmaker for this case at the CMA, said:”Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims. Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in U.K. mobile networks. These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”
Both operators have five working days from March 22 to respond with meaningful solutions to the CMA, otherwise the deal will be referred to a more in-depth Phase 2 investigation.
Vodafone CEO Ahmed Essam had previously noted that Vodafone and Three could potentially reduce investments in the 5G field if local regulators block the proposed merger between the two telcos.
