The UK’s competition authority agrees the merged entity could address competition concerns through network investment and by protecting customers
After months investigating the matter, the UK’s Competition and Markets Authority (CMA) has provisionally found that it could sanction the merger of Three and Vodafone. This would depend on them committing to a multi-billion-pound upgrade the merged company’s network across the UK, including the roll-out of 5G, combined “with short-term customer protections”.
The CMA investigation has been led by an independent inquiry group and thinks these binding measures “could solve competition concerns identified in September and allow the merger to go ahead”. Those concerns were possible higher prices for consumers and MVNOs, like Sky Mobile, Lyca, Lebara and iD Mobile. The CMA also consulted about potential solutions or remedies to address the concerns.
Right to reply by 12 November
Now it has issued a Remedies Working Paper to seek views on the effectiveness of a proposed remedy package. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November. The CMA’s final decision is due before the 7 December statutory deadline.
The CMA investigation has been led by an independent inquiry group It provisionally finds that a legally binding commitment to undertake the network integration and investment programme proposed by Vodafone and Three would improve the quality of the merged company’s mobile network, boosting competition between mobile network operators in the long term and benefiting millions of people who rely on mobile services.
The CMA also thinks short term measures are needed to protect consumers and MVNOs, ensuring they can “secure good deals during the initial years of network integration and investment roll-out”.
What took so long?
It is difficult to understand how it has taken months to reach this conclusion. The two agreed on merger terms in June 2023. Vodafone will own 51% of the combined business and CKHGT 49%. They said at the time they expected the transaction to close before the end of 2024, subject to the necessary approvals.
At the time of the announcement, the two operators said in a joint statement, “From day one, millions of customers of Vodafone UK and Three UK will enjoy a better network experience with greater coverage and reliability at no extra cost, including through certain flexible, contract-free offers with no annual price increases, and social tariffs.”
“Further, the merged company will reach more than 99% of the UK’s population with its 5G standalone network. The combined business will invest £11 billion in the UK over ten years which is expected to give customers up to a six-fold increase in average data speeds by 2034.”
The CMA’s remedies, published today, would require Vodafone and Three to:
- deliver their joint network plan, setting out the network upgrade and improvements they will make through hefty investment over the next eight years across the UK. This would be a legal obligation overseen by telecoms regulator Ofcom and the CMA
- commit to keep certain mobile tariffs and data plans for at least three years to protect millions of current and future Vodafone/Three customers, including subscribers to their sub-brands, from short-term price rises in the early years of the network plan
- commit to agreed prices and contract terms to ensure that MVNOs can obtain competitive wholesale deals.
Vodafone and Three said in a press statement that they will study the Working Paper in detail. But, “From what the CMA has communicated so far this morning, the parties believe it provides a path to final clearance of their merger.
“An appropriate balance appears to have been struck by ensuring that the significant benefits of the merged company’s investments can be realised in full and at pace to the benefit of the country and its citizens, while addressing the CMA’s stated concerns. However, it is essential that balance is preserved through to the end of the process, reflecting that the parties have offered extensive remedies, including by making their future network roll-out fully enforceable.”
A new market leader?
Kester Mann, Director of Consumer and Connectivity at CCS Insight, commented, “Vodafone and Three can tentatively order the champagne as their blockbuster UK joint venture appeared to take another big step forward following a positive statement from the competition watchdog this morning.
“Approval would mark one of the most significant developments in the history of UK mobile, heralding the arrival of a new market leader with over 29 million customers.
“The watchdog’s statement won’t be welcomed by all. BT and Sky Mobile have sternly opposed the deal and are likely to vociferously attempt one final time to have it blocked before the CMA’s final deadline in less than five weeks.”