The UK’s Competitions and Markets Authority (CMA) has cleared the Vodafone-Three merger, subject to legally binding commitments. It’s expected to formally complete in the first half of 2025.
The CMA had previously warned that the proposed merger of Vodafone and Three would likely lead to higher prices and reduced service. The deal is subject to Vodafone-Three delivering a joint network plan, which sets out the network upgrade, integration and improvements the two companies will make to their combined network across the UK over the next eight years.
Vodafone and Three will also need to cap selected mobile tariffs and data plans for three years, which the CMA said would directly protect large numbers of Vodafone-Three customers from short-term price rises in the early years of the network plan. The merged company will also be required to offer pre-set prices and contract terms for wholesale services for three years, to ensure that virtual network providers can obtain competitive terms and conditions as the network plan is rolled out.
The merger of Vodafone and Three is regarded as Vodafone’s response to BT’s 2016 purchase of EE, and the 2021 merger of Virgin Media and O2 to form VMO2.
Margherita Della Valle, Vodafone Group’s CEO, described the combination as being “great for customers, great for competition and great for the country”.
The two companies have committed to investing £11bn to create what they claim is one of Europe’s most advanced 5G networks. The aim is to reach 99% of the population and benefit over 50 million customers. The investment in mobile networking promises better quality, greater reliability and enhanced capacity for handling ever-increasing data demand, according to Vodafone and Three, who see demand for mobile data servers increasing with more widespread adoption of new technology, such as artificial intelligence (AI).
“The CMA’s decision is not a surprise – it has signalled for some time that it was receptive to approving the merger subject to appropriate concessions from the parties,” said Alex Haffner, a competition partner at Fladgate. “Nevertheless, it is noteworthy in that it has permitted a ‘4-3’ merger in the mobile sector on the basis of purely behavioural remedies – over the past decade, a multitude of ‘4-3’ mobile network mergers across Europe have been permitted only on the basis of significant structural remedies being conceded by the merging parties. In doing so, the CMA has displayed a degree of pragmatism, sensing that consumers will ultimately benefit more from competition between three well-resourced mobile operators in the UK market.”
Kester Mann, director of consumer and connectivity at CCS Insight, described the deal as “one of the most significant moments in the history of UK mobile”, heralding the arrival of a new market leader with a combined 29 million customers.
“The CMA’s decision to approve the merger is the right one, and largely strikes a good balance between nurturing competition and encouraging investment,” he said. “It should pave the way for more efficient investments to bring about much-needed improvements to mobile services in the UK.”
However, as Matthew Howett, founder and CEO at Assembly Research, noted, there is still a chance Sky may seek to challenge the decision. He nonetheless said a successful appeal to the CMA’s decision would be hard-fought, expensive and face a high bar. “We expect positive implications overall, not only for investment in, and the quality of, networks (including standalone 5G), but also for the wholesale customers, consumers and businesses that rely on them,” he said.
For Howett, telco regulator Ofcom has a significant new role focused on the oversight of the Vodafone-Three merger. “The regulator seems emboldened to assume these responsibilities,” he said. “Its monitoring will need to be carried out in an agile a way as possible to ensure the merged entity is living up to expectations, and to minimise any risk of circumvention or market distortions that some have warned about.”
Source: https://www.computerweekly.com/news/366616813/CMA-gives-Vodafone-Three-merger-green-light