CMA expected to OK Vodafone and Three merger as competition fears subside

The proposed merger between Vodafone and Three is nearly a done deal.

The Competition and Markets Authority has agreed that a significant network upgrade by the merged company could address competition concerns and allow the merger to proceed.

The CMA now states that a legally binding commitment from Vodafone and Three to undertake their proposed investment program would improve the quality of the merged company’s mobile network. This is expected to boost competition among mobile network operators in the long term and benefit customers.

However, short-term protections would be necessary to ensure that retail consumers and mobile virtual network operators (MVNOs) continue to receive competitive deals during the initial years of network integration and investment roll-out.

Legal obligation

Vodafone and Three are now obligated to deliver their joint network plan, which outlines network upgrades and improvements to be implemented over the next eight years across the UK. This will be a legal obligation, overseen by both Ofcom and the CMA.

They must also commit to retaining certain existing mobile tariffs and data plans for at least three years and to avoid short-term price increases in the early years of the network plan. Additionally, there must be pre-agreed prices and contract terms to ensure MVNOs can access competitive wholesale deals.

Stuart McIntosh, chair of the inquiry group leading the investigation, said:

“This deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed. Our provisional view is that binding commitments, combined with short-term protections for consumers and wholesale providers, would address our concerns while preserving the benefits of this merger. A legally binding network commitment would boost competition in the longer term, while the additional measures would protect consumers and wholesale customers during the network upgrades.”

A final decision is due before the statutory deadline on 7 December. The inquiry group is inviting feedback on today’s announcement by 5 p.m. on 12 November.

Vodafone UK CEO Max Taylor Said:

“We’re pleased the CMA agrees this deal has the potential to be pro-competitive for the UK mobile sector, and we believe the national rollout of a 5G Standalone network has the potential to transform connectivity in the UK. We will need to study the Working Paper in detail, but from what the CMA has communicated so far this morning, we believe it provides a path to final clearance. The CMA’s final decision on the merger is due in early December, and in the coming weeks we will continue to positively engage with them to resolve any outstanding matters”

Telecoms analyst Kester Mann of CCS Insight commented:

“Vodafone and Three can tentatively order in the champagne as their blockbuster UK joint venture appears to have taken another big step forward following a positive statement from the competition watchdog.

“After months of scrutiny, the Competition and Markets Authority (CMA) indicated it is ready to accept the proposed remedies offered by Vodafone and Three, potentially allowing their planned merger to proceed. Approval would mark one of the most significant developments in the history of UK mobile, heralding the arrival of a new market leader with over 29 million customers.

“The watchdog’s statement won’t be welcomed by all. BT and Sky Mobile have sternly opposed the deal and are likely to vociferously attempt one final effort to have it blocked before the CMA’s final deadline in less than five weeks.”