Vodafone-Three merger ‘could mean tens of millions paying more’

Tens of millions of customers face higher mobile phone bills if a proposed £18 billion merger between Vodafone UK and Three goes ahead, the competition regulator has warned.
Setting out its provisional findings on the deal, the Competition and Markets Authority said it also feared that the merger would harm wholesale telecoms customers, such as Lyca Mobile, Sky Mobile and Lebara, which buy from the network operators to provide mobile services.
However, its previous concerns over the sharing of mobile towers with BT have been assuaged.
While the regulator conceded that the merger could improve the quality of mobile networks and may bring forward the deployment of next-generation 5G networks, it argued that some of the companies’ claims had been overstated.
It said that the incentive for rivals to invest may not be as great as the two parties claim and that the merged company might not necessarily follow-through on a promised £11 billion investment programme.
Vodafone and Three, which is owned by CK Hutchison, the Hong Kong-based investor, have argued that they need to combine their operations to reach the scale to compete against EE, which is owned by BT, and Virgin Media O2, itself the product of a merger in 2021. Their proposed deal would create Britain’s biggest mobile network operator, bringing 27 million customers together and reducing the number of operators from four to three.
The competition regulator said it would explore potential solutions to its concerns before making a final decision on the merger by December 7.
Stuart McIntosh, chairman of the inquiry group leading the investigation, 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 [which provide mobile services but do now own the infrastructure].
“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.”
Vodafone and Three said they disagreed with the watchdog’s findings.
Margherita Della Valle, Vodafone’s chief executive, 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. We are offering a self-funded plan to propel economic growth and address the UK’s digital divide.”
She has told The Times previously that without the investment from the deal, the UK’s ambitions to become a world leader in artificial intelligence technologies would suffer.
Robert Finnegan, the chief executive of Three, said: “The current market does not allow the smaller players, ourselves or Vodafone to make a return on money we invest and the larger players do not feel the competitive pressure to invest themselves. As a result of this, Three’s ability to challenge strongly in the core mobile market is reducing and will reduce still further over time.”
The CMA said that imposing structural changes to mitigate its concerns to the proposed deal would be difficult because there was little, apart from mobile networks and spectrum, to divest. It suggested imposing potential binding commitments on the new business, known as behavioural remedies, instead. These included commitments on pricing for customers and wholesalers, as well as on investment, to be supervised by Ofcom, the communications regulator.
Karen Egan, at Enders Analysis, a media industry researcher, called it a “greenish light”, while Paolo Pescatore, a telecoms analyst, said it signalled a “potential path” for the merger to go ahead.
Kester Mann, from CCS Insight, called the proposal of behavioural remedies “significant, as many had feared that more onerous ‘structural remedies’, such as selling assets or supporting a new entrant, would be required. In this sense, Vodafone and Three should be encouraged by the tone of the CMA’s report.”
Vodafone’s shares closed up by ¾p, or 1.1 per cent, at 77½p.