Competition watchdog says Vodafone’s merger with Three could leave customers worse off

Britain’s competition watchdog has raised concerns over the £15bn tie-up of Vodafone and Three UK and launched an in-depth phase two investigation.

The Competition and Markets Authority (CMA) said it feared the deal could reduce competition in Britain’s telecommunications industry and raise prices for consumers and businesses.

In January, the CMA kicked off a formal investigation into whether the merger between Vodafone’s UK operation and CK Hutchinson’s Three UK would substantially lessen competition.

The regulator’s phase one investigation found the combination of the second and fourth largest mobile operators in the UK, “could lead to mobile customers facing higher prices and reduced quality.”

The first phase of the investigation found that Vodafone UK and Three UK provide “important alternatives” for customers, having made substantial investments in UK mobile network infrastructure in recent years, including 5G networks.

What’s more, the CMA said Three is “generally the cheapest” of the four large mobile network providers.

It added: “The CMA is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers. Competitive pressure can help to keep prices low, as well as provide an important incentive for network operators to improve their services, including by investing in network quality.”

Three and Vodafone have five working days to respond with “meaningful solutions” to the CMA.

Vodafone chief exec, Margherita Della Valle, has previously said the deal will be “great for customers, great for the country and great for competition.”

The new entity would be 51 per cent Vodafone-owned and 49 per cent CK Hutchinson-owned.

But the deal will reduce the number of UK networks to three from four, which has sparked concerns that it could hurt consumers and create a monopoly in Britain’s telecoms market.

Three UK, owned entirely by Hong Kong-based CK Hutchinson Holdings, has also sparked concerns among MPs and trade bodies, who have said the company’s links to China may endanger national security. Both operators strongly dispute this.

Julie Bon, Phase 1 decisionmaker for this case at the CMA, said: “Millions of people in the UK depend on effective competition in the mobile market in order to access the best deals for them.

Bon added: “Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims.”

“Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in UK mobile networks. These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”