REG - Competition and Mkts - Merger Update: Vodafone / Three

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13/09/2024 08:15

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RNS Number : 1089E  Competition and Markets Authority  13 September 2024

CMA sets out provisional view on Vodafone / Three merger

·    Merger could lead to tens of millions of mobile customers having to
pay more.

·    Merger could improve the quality of mobile networks, but incentives
to follow through on the investment once deal is complete are uncertain.

·    CMA will explore potential solutions to its concerns before final
decision by 7 December.

An in-depth investigation by the Competition and Markets Authority (CMA) has
provisionally found competition concerns over Vodafone's planned merger with
Three in the UK.

The investigation, led by an independent inquiry group, 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 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 CMA has also provisionally found that the merger would negatively impact
'wholesale' telecoms customers - Mobile Virtual Network Operators (MVNOs) such
as Lyca Mobile, Sky Mobile and Lebara - which rely on the existing network
operators to provide their own mobile services. The merger would reduce the
number of network operators from 4 to 3 making it more difficult for MVNOs to
secure competitive terms, restricting their ability to offer the best deals to
retail customers.

While identifying these concerns, the CMA has also found that the merger, by
integrating the Vodafone and Three networks, 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. But the CMA currently
considers that these claims are overstated, and that 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 concluded that the merger would lead to
a substantial lessening of competition in the UK - in both retail and
wholesale mobile markets.

The CMA will now consult on its provisional findings. It will also consult on
potential solutions to its competition concerns, including the options set out
in its remedies notice (also published today). These include legally binding
investment commitments overseen by the sector regulator, and measures to
protect both retail customers and customers in the wholesale market. The CMA
will retain the option to prohibit the merger should it conclude that other
remedy options will not address its competition concerns effectively.

Stuart McIntosh, chair of the inquiry group leading the investigation, 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.

"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."

The CMA welcomes responses to its provisional findings by 4 October 2024 and
its notice of possible remedies by 27 September 2024. These will be considered
ahead of the CMA issuing its final report, which is due by 7 December 2024.

More information can be found on the Vodafone / CK Hutchison JV case page
(https://www.gov.uk/cma-cases/vodafone-slash-ck-hutchison-jv-merger-inquiry?)
 and on the detailed guidance page
(https://www.gov.uk/guidance/how-we-are-investigating-the-vodafonethree-potential-merger)
.

-ENDS-

NOTES TO EDITORS

1.   Vodafone UK (which is owned by Vodafone Group Plc) and Three UK (which
is owned by CK Hutchison Holdings Limited) are two major providers of mobile
telecommunication services in the UK. Last year both businesses announced a
new joint venture agreement which would bring their 27 million customers under
a new, single network operator.

2.   The 4 mobile network operators in the UK are Vodafone UK, Three UK,
BTEE and Virgin Media O2.

3.   'Virtual' network operators - such as Sky Mobile, Tesco Mobile, Lebara
and Lyca Mobile - do not own their own networks and rely on access to a mobile
network operator's network to supply mobile services to their customers.

4.   The CMA's remit, by law, is to assess the potential impact of a merger
on competition. It cannot consider other potential effects that a merger might
have, for example, on access to personal data. National security concerns are
a matter for the UK government
(https://www.gov.uk/government/publications/the-national-security-and-investment-act-alongside-regulatory-requirements/the-national-security-and-investment-act-alongside-regulatory-requirements)
, which may choose to intervene under the National Security and Investment Act
(NSIA) if it finds concerns. On 9 May 2024, the Secretary of State responsible
for the NSIA approved the deal, subject to certain conditions.

5.   During the course of its Inquiry, the CMA has drawn on support from
Ofcom, the communications industry regulator. As part of the remedies process
the CMA will consider Ofcom's involvement in any possible remedies.

 

6.   All media enquiries should be directed to the CMA press office by email
on press@cma.gov.uk (mailto:press@cma.gov.uk) or by phone on 020 3738 6460.

 

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