The CMA noted that it will release its final report on the Vodafone-Three merger on December 7, 2024
An in-depth investigation carried out by the U.K.’s Competition and Markets Authority (CMA) has identified competition concerns related to Vodafone’s planned merger with rival operator Three, the regulator said in a statement.
The investigation, led by an independent inquiry group, has provisionally concluded that the Vodafone-Three UK merger would lead to price increases millions of mobile customers in the U.K., or see customers get a reduced service such as smaller data packages in their contracts. The CMA also said that it has particular concerns that higher bills or reduced services would negatively affect those customers least able to afford mobile services as well as those who might have to pay more for improvements in network quality they do not value.
The regulator has also provisionally found that the merger between Vodafone and Three would negatively impact Mobile Virtual Network Operators (MVNOs) because it would reduce the number of network operators from the current four to three making it more difficult for MVNOs to secure competitive terms for their offerings.
CMA did also find that the merger could improve the quality of mobile networks and boost the deployment of 5G networks and services in the country, as claimed by Vodafone and Three. However, the regulator considers that these claims are “overstated” and that the merged firm may lack the incentive to follow through on its proposed investment program once the merger process if completed.
As a result, the CMA has provisionally concluded that the merger would lead to a substantial lessening of competition in the U.K. in both retail and wholesale mobile markets.
Stuart McIntosh, chair of the inquiry group leading the investigation, said: “We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments.”
The body outlined various remedy options it is set to investigate. These include “binding investment commitments overseen by the sector regulator, and measures to protect both retail customers and customers in the wholesale market”.
The CMA also said it will retain the option to prohibit the merger should it conclude that other remedy options will not address its competition concerns effectively.
The deadline for submitting comments on the report is October 4, with submissions related to remedies due by September 27. The CMA plans to make a final decision by December 7.
“While Vodafone UK disagrees with a number of elements in the CMA’s provisional findings, the companies will continue to positively engage with the CMA to resolve outstanding matters ahead of the final report on December 7, 2024,” Vodafone and Three said in a joint statement. “Despite CMA concerns, a combined, stronger network would also boost competition in the wholesale market. By creating a third network that has the scale required to compete with the UK’s two leading converged operators, the merger would offer greater choice to MVNOs.”
Both carriers added that the proposed merger would not lead to higher tariffs for mobile users. “From the outset, we have been very clear that the merger will not affect our pricing strategy and that all social tariffs,” the telcos added.
will continue to protect the vulnerable.
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, which started in April, allow an independent panel of experts to probe in more depth initial concerns identified at phase 1, the CMA previously explained.
In May, the U.K government released a “publication of notice of Final Order” that provisionally approves the merger, subject to certain conditions.
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 four mobile network operators in the U.K. are Vodafone UK, Three UK, BT’s EE and Virgin Media O2.
