The proposed merger between Vodafone and Three could lead to tens of millions of mobile customers in the UK facing higher bills, according to a provisional report from the Competition and Markets Authority (CMA). The regulator raised concerns that the merger, while potentially improving network quality, may result in significant price increases or reduced services for both retail and wholesale mobile customers.
The CMA’s in-depth investigation, led by an independent inquiry group, is examining the impact of the £15 billion deal, which would reduce the number of UK mobile network operators from four to three. The watchdog has provisionally found that the merger may result in higher costs or fewer services for many customers, particularly those who are already financially vulnerable. Some customers could also be forced to pay more for network improvements they do not necessarily value.
Stuart McIntosh, chair of the inquiry group, said:
“We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.”
Concerns for Retail and Wholesale Markets
The report highlighted potential negative impacts on both retail customers and wholesale customers such as Mobile Virtual Network Operators (MVNOs), which rely on network operators like Vodafone and Three to offer their services. MVNOs include brands such as Sky Mobile, Lyca Mobile, and Lebara, which typically target more cost-conscious consumers. The CMA expressed concern that the reduced number of network operators would restrict MVNOs’ ability to secure competitive terms, ultimately affecting their ability to offer affordable deals to retail customers.
McIntosh emphasised that the regulator must ensure the merger does not diminish competition in either market. “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.”
Potential Benefits and Overstated Claims
Vodafone and Three have claimed that the merger could improve the quality of mobile networks and accelerate the deployment of 5G services in the UK. While the CMA acknowledged that integrating the two networks might lead to better mobile coverage and speeds, it raised doubts about whether the companies would have enough incentive to follow through on these improvements after the merger is completed. The report suggested that the benefits of the merger might be overstated and that consumers could bear the brunt of higher prices without seeing significant network enhancements.
Exploring Remedies
The CMA will now enter a consultation phase, inviting responses to its provisional findings by 4 October 2024 and suggestions for potential remedies by 27 September 2024. Possible solutions include legally binding investment commitments, overseen by the telecommunications regulator, to ensure the promised improvements are delivered. Measures to protect retail customers and MVNOs from increased costs are also under consideration.
If suitable remedies are not found, the CMA could block the merger altogether. The final decision is expected on 7 December 2024.
The Vodafone-Three merger, if approved, would create one of the largest mobile networks in the UK, with significant implications for both consumers and the broader telecommunications market. The CMA’s provisional findings have now added a layer of uncertainty to the deal, raising questions over the future of competition in the mobile industry.