The CMA recently highlighted concerns that the Vodafone-Three UK deal could lead to mobile customers facing higher prices and reduced quality
U.K. carriers Vodafone and Three UK said that the recent decision by the U.K.’s Competition and Markets Authority (CMA) to carry out a new in-depth review of their proposed merger was in line with the expected timeframe for completion of the transaction. In a joint statement, the two telcos also said they remain confident that the transaction will deliver significant benefits in terms of competition.
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 that 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%.
“The current market structure has resulted in the quality of mobile network services in the U.K. lagging significantly behind other European countries. Vodafone UK and Three UK are sub-scale, unable to cover their cost of capital and constrained in their ability to invest and compete effectively against the two market leaders [EE and Virgin Media O2]. As a result, customers and businesses are missing out on the benefits offered by enhanced digital connectivity,” the carriers said.
“The merger will create a third mobile network operator with scale, able and incentivized to invest fully in a best-in-class network. A combined network would also boost competition in the wholesale market, by offering greater choice to MVNOs, the fastest growing segment of the UK’s mobile industry,” they added.
Vodafone UK CEO Ahmed Essam said: “Having reached this important milestone, we look forward to working with the independent panel on the Phase 2 process. This transaction will create an operator with the scale required to take on EE and Virgin Media O2, give MVNOs greater choice in the wholesale market and is in the wider interests of customers, competition and the country.”
The telcos also noted they will review the potential concerns raised by the CMA and look forward to continuing to engage constructively with the regulator.
The CMA recently highlighted that it has concerns that the deal could lead to mobile customers facing higher prices and reduced quality.
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.
