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CMA questions competition and investment impact of Vodafone/Three deal

The Competition and Markets Authority has asked for comments on the proposed merger of Vodafone and Three in the UK in advance of opening a formal investigation into the deal.

Mary Lennighan

October 11, 2023

3 Min Read
CMA questions competition and investment impact of Vodafone/Three deal

The Competition and Markets Authority has asked for comments on the proposed merger of Vodafone and Three in the UK in advance of opening a formal investigation into the deal.

The UK’s competition watchdog said it is providing an early an early opportunity for interested parties to share their thoughts on the deal. It also took the opportunity to highlight what will be the key aspects of its upcoming investigation: the potential impact of the tie-up on both competition and future investment in the market.

After many months of dancing around the open secret of their merger plan, Vodafone and Three finally announced their intention to combine their UK businesses in June. Naturally, that plan proved divisive from the get-go and the regulatory process was never likely to be quick; the CMA’s ruling in the case is expected in September 2024.

The CMA asking for early comments suggests it is keen to crack on though.

The views it collects as part of this early consultation will assist with the process of evidence-gathering ahead of the formal investigation, the CMA said. It will provide further opportunities to submit views once the Phase 1 investigation gets underway.

“We will be carefully considering how this deal may affect competition in the UK, which could affect the options and prices available to customers,” said Sarah Cardell, chief executive of the CMA. “We will also assess how it may affect incentives to invest in the quality of UK mobile networks.”

No surprises there. The merger of Vodafone and Three would reduce the number of mobile networks in the UK to three from four, which would naturally reduce choice for consumers and virtual players, and raise concerns over the possibility of price hikes. And lower competition does perhaps means players are less likely to invest to compete on quality or to offer new services.

But while there’s nothing unexpected in the CMA’s comments, they do give as idea of what we – and the telcos in question – are in for over the next few months.

Vodafone and Three tackled these potential regulatory concerns from the outset, talking up their intention to bring more choice and better value to the market, and the fact that as a merged entity they will have the scale to facilitate greater investment. But it will take more than just talk to get the CMA onside and doubtless the pair are busy thinking up possible remedies that may or may not appease the regulators.

Ultimately, those remedies are likely to be the only real chance the telcos have of getting this deal over the line.

Let’s not forget that the CMA has previously argued against a proposed UK merger that would have reduced the number of mobile network operators to three. It’s more than seven years since the European Commission moved to block Three’s proposed acquisition of O2 in the UK; that block is still being batted about in the courts, but that’s not hugely relevant here. The important point is that while Brussels is no longer in charge of ruling on UK mergers, the CMA also opposed that tie-up.

This is a fast-moving industry, but it’s questionable whether enough has changed in the intervening years to convince the watchdog that three mobile networks are enough.

 

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About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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