Vodafone's merger with Three U.K. would lead to higher phone bills, regulator says

By Louis Goss

The U.K.'s Competition and Markets Authority has said Vodafone's plans to merge with rival telecoms company Three UK would lead to higher phone bills for tens of millions of mobile customers.

The competition regulator said the proposed GBP16.5 billion ($21.7 billion) merger between Vodafone and CK Hutchison's British subsidiary would lead to a "substantial lessening of competition in the U.K. - in both retail and wholesale mobile markets."

Vodafone (UK:VOD) first announced plans to merge with Three UK in Jun. 2023, having struck a deal with its smaller British rival's Hong Kong headquartered owner, CK Hutchison (HK:1), to combine the two firms and create the U.K.'s largest phone operator.

The CMA later launched a formal investigation into the proposed merger in January this year over concerns the combining of two of the U.K.'s four mobile network operators might lead to higher prices or a reduction in the quality of services.

"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 said Friday.

The regulator said higher bills and reduced services as a result of the merger would have the greatest negative impacts on customers least able to afford mobile services and said it believes claims the merger could improve the quality of the U.K. mobile networks are overstated.

The CMA said the merger could also make it harder for Mobile Virtual Network Operators (MVNOs) including Sky Mobile, Lyca Mobile and Lebara to secure competitive terms for wholesale deals, in what lead to them increasing prices for their own customers.

Vodafone and Three UK must now offer possible remedies to the CMA's concerns, which could see it make legally binding investment commitments and introduce measures aimed at protecting both retail and wholesale customers.

The CMA could also block the merger if it concludes the remedies will not go far enough in addressing its competition concerns and is now set to consult on its provisional findings and issue a final report on 7 Dec 2024.

FTSE 100 index telecoms giant Vodafone had previously said the merger would see it invest GBP11 billion in the U.K.'s 5G network over a five year period in a push that would add GBP5 billion in extra value to the British economy.

Vodafone is currently the U.K.'s third largest mobile operator with around 17.5 million customers, while Three UK is the country's fourth largest operator with around 9.9 million customers.

-Louis Goss

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09-13-24 0430ET

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