Vodafone-Three merger could hike prices, finds UK watchdog

The Competition and Markets Authority will give its final decision on the major merger deal by 7 December.

The UK Competition and Markets Authority (CMA) today (13 September) announced its provisional view on the Vodaphone-Three merger, stating that this deal could lead to millions of customers having to pay more.

This merger would lead to the creation of the biggest mobile operator in the UK with a combined business of 27m customers.

The CMA investigation, led by an independent inquiry group, found that the deal could lead to customers getting reduced services such as smaller data packages.

“The CMA has particular concerns that higher bills or reduced services would negatively affect those customers least able to afford mobile services as well as those who might have to pay more for improvements in network quality they do not value,” the authority said.

Also, as the deal would reduce the number of network operators from four (Vodafone, EE, O2 and Three) to three, this would affect mobile virtual network operators (MVNO) or ‘wholesale’ telecoms customers who rely on existing network operators to provide their own services, such as Lyca Mobile and Sky Mobile, making it harder for them to secure competitive terms. This would then trickle down to customers who might lose out on better deals.

Vodafone and Three first confirmed talks of a merger of their UK operations in October of 2022.

“By combining our businesses, Vodafone UK and Three UK will gain the necessary scale to be able to accelerate the roll-out of full 5G in the UK and expand broadband connectivity to rural communities and small businesses,” Vodafone said back in 2022.

Vodafone Group CEO Margherita Della Valle said in 2023 when the companies entered into binding agreements that the deal will be “great for customers, great for the country and great for competition”.

In its announcement today, the CMA agreed with Vodafone and Three’s claims that the merger could improve the quality of mobile networks and the deployment of 5G networks, but also considers that they could be overstated.

“The merged firm would not necessarily have the incentive to follow through on its proposed investment programme after the merger.”

As a result, the CMA has provisionally found that a merger would lead to a substantial lessening of competition in the UK. However, the authority is looking to find potential solutions to the concerns it raised.

“We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments,” said Stuart McIntosh, who chaired the group leading the investigation.

Matthew Howett, CEO of Assembly Research, said that the CMA’s concerns over what consumers pay is remediable.

“While prices in the UK are already some of the lowest among European peers (including the US and Japan), it’s possible to see a workable commitment to social tariffs, or contracts that give protection to the most sensitive to any rise in prices, even if by a small amount.”

The CMA will give its final decision on the matter by 7 December.

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