On Friday, England’s competition watchdog said it found competition concerns with the proposed merger Vodafone and Three UK mobile networks owned by CK Hutchison.
The UK Competition and Markets Authority (CMA) said the deal would lead to price increases for tens of millions of customers or cut services for some users. The regulator also warned of a negative impact for Mobile Virtual Network Operators (MVNOs) that rely on existing infrastructure.
“The CMA has provisionally concluded that the merger would lead to a significant lessening of competition in both the retail and wholesale mobile markets in the UK,” the regulator said in a press release.
The Vodafone and CK Hutchison transaction announced last year will combine the two brands’ UK businesses, giving Vodafone a 51% controlling stake and leaving CK Hutchison in the minority.
But the CMA opened an antitrust investigation into the deal in January and announced an in-depth investigation in April.
The regulator said Friday that the merger would result in higher prices or reduced services and “could adversely affect customers who can least afford their mobile services.”
A merger of Vodafone and Three UK would also reduce the number of major telecoms network players from four to three, which the regulator said could make it harder for MVNOs to secure competitive deals that could reduce their ability to offer customers competitive rates.
However, the CMA agreed that the deal “could improve the quality of mobile networks and advance the deployment of next-generation 5G networks and services claimed by the two merging networks”.
However, the CMA said these claims “may be overstated” and that the merged firm “would not necessarily be motivated to follow through on its proposed investment program post-merger”.
The CMA did not block the deal.
Vodafone’s response
Vodafone said the combined entity would invest 11 billion pounds ($14.46 billion) in UK telecommunications infrastructure.
“It provides huge benefits for consumers in cities, towns, across the country,” Ahmed Essam, Vodafone’s CEO of European markets, told CNBC’s “Squawk Box Europe” on Friday.
Vodafone has argued that the UK’s digital infrastructure continues to lag behind other major economies and its investment will help boost areas such as next-generation 5G networks and wider coverage to more parts of the country.
Vodafone said in a separate statement on Friday that it disagreed with findings that the merger would lead to price increases for consumers. The company said the merger will not affect its pricing strategy and that there will be enhanced competition among MVNOs.
“I think every consumer in the UK today recognizes that there are not just four players … there are more than a hundred players in the market offering a wide range of offers. And with this merger we are bringing a third scale quality network. We can compete and get better results for customers. do it,” said Essam.
What’s next?
The CMA said it would now consult on interim findings and remedies for competition concerns, including legal remedies. These may include legally binding investment obligations and measures to protect both retail and wholesale customers.
The CMA could block the merger if its concerns are not addressed, the regulator said.
Essam said Vodafone was ready to deliver on its legally binding £11bn infrastructure investment pledge and to deliver at the pace promised.
“We are working closely with the CMA … these are interim findings, which means we are working with the CMA over the next three months to address their concerns,” Essam said.
The CMA will release its final report by December 7 this year.
