Vodafone-Three Merger Faces Hurdles as UK Regulator Signals In-Depth Probe

Britain’s competition regulator announced on Thursday its intention to initiate an in-depth investigation into the $19 billion deal between Vodafone and Hutchison’s Three to combine their telecom business in the UK.
Vodafone store UK
The Competition and Markets Authority (CMA) of the UK in a statement said Vodafone and Three did not provide satisfactory remedies to address competition concerns. The successful merger will create a telecom giant with 27 million mobile phone customers in the UK.

The CMA has appointed the inquiry group:

Stuart McIntosh (Chair)

Stephen Rose

Ashleye Gunn

Crispin Wright

The merger will be diminishing the number of major telecom networks in the UK from four to three. This move challenges the conventional wisdom that a greater number of competitors helps maintain lower prices.

A recent study said the UK mobile network market has seen consolidation, leaving fewer choices for consumers. BT Mobile and Plusnet Mobile do not exist, and Virgin Mobile has been removed from the market after its merger with O2. Vodafone and Three have also agreed on a merger.

In addition, several Mobile Virtual Network Operators (MVNOs) have recently gone out of business, such as Vectone Mobile, which folded in December.

CMA had previously voiced apprehensions about the deal, expressing fears that it could potentially harm consumers and businesses by leading to increased prices and reduced investment in the sector. In response, the CMA had called upon the merging parties to propose substantive solutions to address these concerns.

However, in a statement issued on Thursday, the CMA disclosed that the parties involved had opted not to offer any undertakings to assuage the regulator’s worries.

Echoing the sentiments of the CMA, concerns revolve around the potential erosion of competition in the mobile telecommunications landscape. The merger is feared to stifle rivalry among operators, which typically drives down prices and incentivizes enhancements in service quality through investment in network infrastructure.

Additionally, the CMA highlighted the potential adverse impact on smaller mobile virtual network operators (MVNOs), such as Sky Mobile, Lebara, and Lyca Mobile. The consolidation could limit their ability to negotiate favorable terms with network hosts, consequently hindering their competitiveness in the market.

The claims made by Vodafone UK and Three UK regarding their post-merger network integration and investment plans are subject to scrutiny by the CMA. The regulator deems it necessary to conduct a detailed assessment of these assertions, particularly in light of concerns that the merger might dampen overall incentives for mobile operators to invest in network expansion and improvement.

Baburajan Kizhakedath