Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The UK competition watchdog has found that the proposed £16.5bn merger of Vodafone’s domestic business with CK Hutchison’s Three UK could lead to higher bills for tens of millions of customers, and demanded that the companies make changes to the deal.
The companies must agree remedies for the tie-up to proceed, the Competition and Markets Authority said on Friday, as it announced the initial findings of an in-depth probe into the deal, which was first announced in 2023. The regulator said it would “explore potential solutions” to its concerns before a final decision by December 7.
The merger is expected to create the country’s largest mobile operator, and would cut the number of operators from four to three.
“The investigation . . . has provisionally concluded that the merger would lead to price increases for tens of millions of mobile customers, or see customers get a reduced service, such as smaller data packages in their contracts,” the CMA said in a statement.
“The CMA has particular concerns that higher bills, or reduced services, would negatively affect those customers least able to afford mobile services,” it added.
The CMA opened a “phase 2 investigation” into the deal almost six months ago after deciding in an initial review that the companies had not provided enough evidence that it would benefit competition and investment.
The competition watchdog said it had also provisionally concluded the deal would negatively affect wholesale customers — mobile virtual network operators such as Sky Mobile and Lebara — which use other mobile networks to provide their services.
Remedies proposed by the CMA include legally binding investment commitments overseen by the communications regulator, and measures to protect retail and wholesale customers.
The regulator said it would also further explore a partial divestiture of certain mobile network assets that could aid competition for the virtual network operators and potentially allow a new provider to enter the market.
The CMA acknowledged that the deal “could improve the quality of mobile networks and bring forward the deployment of next generation 5G networks and services”, as claimed by Vodafone and Three UK.
The companies said in a joint statement that they “disagree with the CMA’s provisional findings that their merger raises competition concerns and could lead to price rises for customers”, and that they “look forward to working with the CMA to secure approval”.
When the deal was announced, the companies said the merged business would invest £11bn over 10 years to support the rollout of 5G networks and that there would be no change to their pricing.
Robert Finnegan, chief executive of Three UK, said the current UK mobile market was “dysfunctional and lacks quality competition” and the companies were “determined to reassure the CMA” and “work with them to secure the extensive benefits this merger brings”.
Tom Smith, a competition lawyer at Geradin Partners and former CMA legal director said: “The CMA rarely changes its mind between the provisional decision and the final decision, so the focus will now move on to the effectiveness of the various remedy options.”
“The CMA has raised a range of possible remedies, including supervising the investment promises while protecting consumers from price rises in the meantime. This type of behavioural remedy would be highly unusual in CMA merger cases,” he added.
