The UK’s competition watchdog, the Competition and Markets Authority (CMA), has warned that the proposed merger of mobile networks Vodafone and Three could result to “higher prices” and “reduced quality” for customers. The CMA will put the deal under thorough examination, unless both companies can soon mitigate their concerns.
Vodafone and Three announced last summer about their £15 billion merger, which would make the largest mobile phone network in the UK.
Despite the CMAs initial concerns, both mobile companies insist that this deal would boost investment and strengthen their competitiveness against major rivals such as EE operator BT and Virgin Media-O2.
An initial phase 1 investigation launched by the CMA into the merger move last January raised issues regarding two of the UK’s four largest mobile firms merging.
According to the regulator, they fear that “concerned the deal … could lead to mobile customers facing higher prices and reduced quality”. They found from their initial investigation that both companies are important alternatives for mobile customers and merging these two businesses will lessen the competition amongst mobile operators for acquiring new customers.
Phase 1 decision-maker for this case at the CMA, Julie Bon expressed her thoughts, saying: “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.”
The watchdog also expressed worries that the deal “may make it difficult” for smaller mobile operators such as Sky Mobile, Lebara and Lyca Mobile to secure favorable deals for their customers by reducing the number of mobile network operators available to host them.
Vodafone UK chief executive officer Ahmed Essam said: “Having reached this important milestone, we look forward to working with the independent panel on the phase two process.”
“By merging our two companies, we will be able to invest £11 billion to help the UK realise its ambitions to be a world leader in next-generation 5G technology and increase competition across the industry.”
“This transaction will create an operator with the scale required to take on BT/EE and Virgin Media-O2, give MVNOs (mobile virtual network operators) greater choice in the wholesale market and is in the wider interests of customers, competition and the country.”
Three UK chief executive officer Robert Finnegan said: “The current market structure is holding the UK back, which is not good for customers or competition.”
5G technology and greater choice for customers. However, only time will tell if the CMA agrees with these assessments and approves the deal.
“By creating a third player with the necessary scale to invest, the combination of our two companies will deliver one of Europe’s most advanced networks and move the UK into the digital fast lane, benefiting customers from day one.”