The deal which aims to combine two of the four mobile network operators in the UK, Vodafone UK (owned by Vodafone Group Plc) and Three UK (owned by CK Hutchison Holdings Limited), could lead to higher prices for customers and influence investment in mobile networks in the UK.
On March 22, 2024, theCompetition and Markets Authority (CMA) ha published an announcement regarding its initiation of preliminary phase 1 investigationafter being notified by Vodafone UK and Three UK.
This 40 working day review aims to identify whether the agreement could lead to a “substantial reduction of competition” – focusing on the possible impact on consumers and businesses in the UK – and therefore requires a more in-depth Phase 2 investigation.
Phase 2 investigations allow an independent panel of experts to further investigate the initial concerns identified in Phase 1.
The CMA is concerned that the deal, which combines two of the four mobile network operators in the UK, could lead to mobile customers facing higher prices and reduced quality.
LCMA Phase 1 investigation found that Vodafone UK e Three UK they provide important alternatives for mobile customers. Both have made significant investments in their networks in recent years, which include the deployment of 5G.
The CMA is concerned that the combination of these two activities will reduce rivalry between mobile operators to win new customers. Competitive pressure can help keep prices low, as well as providing an important incentive for network operators to improve their services, including investing in network quality.
The CMA is also concerned that the deal could make it difficult for smaller “virtual” mobile operators such as Sky Mobile, Lebara and Lyca Mobile to negotiate good deals for their customers, reducing the number of mobile network operators capable of hosting these “ virtual networks”.
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When they announced their deal last year, both Vodafone UK and Three UK argued that combining the two businesses would deliver significant benefits for customers and accelerate the deployment of new technologies.
These types of claims can sometimes justify granting an agreement that would otherwise raise competition concerns.
Vodafone UK and Three UK have said their claims are based on a number of assumptions about how they will combine and invest in their networks after the merger. The CMA believes that these assumptions require more detailed assessment, especially in light of the CMA’s concerns that the merger could reduce mobile operators’ overall incentives to invest in their networks.
Julie Gooda phase 1 technician for this case at the CMA, said: “Millions of people in the UK depend on effective competition in the mobile market to access the best deals for them. Although Vodafone and Three have made various claims about how their deal is good for competition and investment, the CMA has so far not seen sufficient evidence to support these claims. Our initial assessment of this deal identified concerns that it could lead to higher prices for customers and less investment in mobile networks in the UK. These require a thorough investigation unless Vodafone and Three can present solutions.”
Both Vodafone UK and Three UK have five working days to respond with meaningful solutions to the CMA, otherwise the deal will be subject to a more in-depth Phase 2 investigation.
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