The UK’s Competition and Markets Authority (CMA) has raised significant concerns over the proposed merger between Vodafone and Three, citing potential negative impacts on competition in the mobile networks market.
An independent inquiry group leading the investigation has tentatively concluded that the merger could cause price increases for millions of mobile customers. It could also lead to reduced services, including smaller data packages in contracts. Stuart McIntosh, chair of the inquiry group, emphasized, “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 could potentially improve mobile network quality and accelerate 5G deployment, it currently sees these benefits as overstated. This presents a notable challenge for Vodafone and Three, who argue that their merger is crucial for improving the UK’s mobile infrastructure. According to them, the merger will address the dysfunctions of the current mobile market, unleashing more competition and investment. They cite analysis showing that the UK ranks 22nd out of 25 European countries for 5G availability and speed.
Margherita Della Valle, CEO of Vodafone, stated, “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.”
The CMA’s stance has ignited a debate between regulatory caution and industry ambitions for better infrastructure. However, industry analysts see potential paths forward. Kester Mann, Director of Consumer and Connectivity at CCS Insight, noted, “The CMA offers a potential path to approval through a range of remedies. Crucially, it appears willing to consider ‘behavioral remedies’ such as enhanced network access for virtual providers or safeguards for retail customers.”
Mann pointed out that many had feared the CMA might require more drastic structural remedies, like selling assets or supporting a new entrant. However, the CMA’s current tone appears more open to the merger than expected, encouraging Vodafone and Three.
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 potential solutions, including legally binding investment commitments overseen by the sector regulator.
Responses to these provisional findings are welcomed by 4 October 2024 and responses to the notice of possible remedies by 27 September 2024. The CMA will consider these before issuing its final report, due by 7 December 2024.
Kester Mann emphasizes the significance of the upcoming months for the UK telecom sector, asserting that a combined Vodafone and Three could make more efficient investments and push competitors to improve their services, boosting the market’s overall long-term connectivity credentials.
