The Competition and Markets Authority (CMA) has provisionally identified competition concerns over the proposed Vodafone–Three merger in the UK.
An independent inquiry group leading the investigation has tentatively concluded that the merger could result in higher prices for tens of millions of mobile customers or reduced service levels, such as smaller data allowances in consumer contracts.
Stuart McIntosh, chair of the inquiry group, said: “We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.”
While the CMA acknowledged that the merger might improve mobile network quality and accelerate the rollout of 5G, it currently regards those claims as overstated. That doubt is a major setback for Vodafone and Three, who maintain that combining their businesses is essential to improving the UK’s mobile infrastructure.
In response to the CMA’s provisional findings, Vodafone and Three said their merger will “fix the country’s dysfunctional mobile market characteristics, unleashing more competition and investment.” They pointed to analysis from Opensignal suggesting the UK ranks near the bottom of European countries for 5G availability and speed, and that its average data speeds lag other G7 nations.
Margherita Della Valle, Vodafone’s CEO, said: “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 the country deserves.”
End of the road for the Vodafone–Three merger?
The CMA’s provisional objection has triggered a debate between regulatory caution and industry ambitions to upgrade the UK’s mobile infrastructure. Despite the regulator’s concerns, analysts believe there are potential routes forward for the deal.
Kester Mann, Director of Consumer and Connectivity at CCS Insight, observed that “the CMA offers a potential path to approval through a range of remedies. Crucially, it appears willing to consider ‘behavioural remedies’ such as enhanced network access for virtual providers or safeguards for retail customers.”
Mann added that this stance is notable because many had expected the CMA to demand more severe “structural remedies,” such as forced divestments or measures to support a new market entrant. “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,” he said.
The CMA has provisionally concluded that the merger would substantially lessen competition in both retail and wholesale mobile markets in the UK. It will now consult on its provisional findings and consider potential solutions to address those competition concerns, including legally binding investment commitments overseen by the sector regulator.
The CMA is inviting responses to its provisional findings by 4 October 2024 and comments on its notice of possible remedies by 27 September 2024. Those responses will be reviewed before the CMA issues its final report, due by 7 December 2024.
“The next three months may prove to be the most pivotal in the history of the UK telecoms sector,” Mann said. He argued that approving the merger could be the best outcome for the industry long term, suggesting a combined Vodafone and Three could make more efficient investments and spur rivals such as BT and Virgin Media O2 to improve their networks, ultimately raising the market’s overall connectivity performance.
A final decision on the Vodafone–Three merger is expected in December and could significantly reshape the UK mobile services landscape.
(Photo by Bernd Dittrich)
See also: Ofcom report analyses UK mobile connectivity
Unified Communications is a two-day event held in California, London and Amsterdam that explores the future of workplace collaboration in a digital world. The event is co-located with Digital Transformation Week, IoT Tech Expo, Edge Computing Expo, Intelligent Automation, AI & Big Data Expo, and Cyber Security & Cloud Expo.
Explore other upcoming enterprise technology events and webinars powered by TechForge.