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CMA raises red flags over proposal

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The Competition and Markets Authority (CMA) has provisionally found 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 price hikes for tens of millions of mobile customers or lead to reduced services, such as smaller data packages in 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 could improve mobile network quality and accelerate the deployment of 5G networks and services, it currently considers these claims to be overstated. This scepticism is a significant setback for Vodafone and Three, who argue that their combination is crucial for improving the UK’s mobile infrastructure.

In response to the CMA’s findings, Vodafone and Three jointly stated that their merger will “fix the country’s dysfunctional mobile market characteristics, unleashing more competition and investment.” They cite Opensignal analysis showing that the UK ranks 22nd out of 25 European countries for 5G availability and speed, with the slowest data speeds amongst the G7.

Margherita Della Valle, CEO of Vodafone, argued: “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 to the merger has sparked a debate between regulatory caution and industry ambitions for improved infrastructure. Despite the CMA’s concerns, 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 ‘behavioural remedies’ such as enhanced network access for virtual providers or safeguards for retail customers.

“This is 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 which appears more open to the merger than I was expecting.”

The CMA has provisionally concluded that the merger would lead to a substantial lessening of competition in both retail and wholesale mobile markets in the UK. It will now consult on its provisional findings and potential solutions to its competition concerns, including legally binding investment commitments overseen by the sector regulator.

The CMA is welcoming responses to its provisional findings by 4 October 2024 and its notice of possible remedies by 27 September 2024. These responses will be considered 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 emphasises. He maintains that approving the merger would be the best outcome for the future of the UK mobile industry, arguing that a “combined Vodafone and Three can make more efficient investments and push BT and Virgin Media O2 to raise their game too, boosting the market’s long-term connectivity credentials.”

The final decision on the Vodafone-Three merger is expected in December and could significantly reshape the landscape of mobile services in the country.

(Photo by Bernd Dittrich)

See also: Ofcom report analyses UK mobile connectivity

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Tags: 5G, acquisition, competition, connectivity, europe, merger, mobile, Networks, regulation, telecoms, Three, vodafone, vodafone-three


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