Britain’s Competition Watchdog has officially requested an in-depth probe of the planned £18 billion merger between Vodafone UK & Three.
The companies failed to submit any “meaningful” solutions that could have alleviated competition concerns within the deadline required. As a result, the Competition and Markets Authority will continue its phase two review of this proposed deal. The CMA announced the long-awaited move at the end last month, after stating that the deal could result in mobile customers paying higher prices and experiencing a reduced level of quality.
In a preliminary report, the company found that Vodafone UK offers different options for mobile users and consolidation can affect competition between mobile operators.
Companies argued they had to increase their operations to cope with the rising demand for services from customers who are price sensitive and to invest in expensive infrastructure.
The joint venture between Vodafone UK and Three UK (owned by Hong Kong listed conglomerate CK Hutchison) would create Britain’s largest mobile network operator. It would bring 27 million customers together, and reduce the number of operators to three.
The European Commission, in 2015, blocked Three’s proposed takeover of O2, leaving the UK with only three mobile operators. This was despite Three offering a five-year freeze on prices and billions of dollars of investment. They did this because they found that it would decrease customer choice and increase prices.
In its 2022 discussion paper which outlined its future approach to the mobile market, Ofcom stated that it had no “fixed position” in relation to “future mobile consolidation”. It also stressed that competition was not just about “the number of competitors”.
A spokesperson for the two telecoms companies said: “Vodafone UK, and Three UK, remain confident that this transaction will lead to stronger competition in mobile and give customers and business a step-change change in network coverage and quality from the first day. A combined network will also increase competition on the wholesale market, by giving mobile virtual network operators more choice. This is the fastest-growing segment of UK’s mobile sector.
Unite, the union that leads a campaign to oppose this deal, has warned it will add £300 per year more on consumers’ bills. It could also threaten thousands of jobs.
As Three is a foreign-owned company, any deal in the telecoms industry would be subject to a mandatory review.
Three announced its first loss since 2010 the day before CMA’s assessment. The company cited the increased costs of running the 5G network and the inflation rate for the loss of £117million before deductions. This compares to a profit in 2022 of £147million.