Vodafone-Three merger would lead to higher bills for ‘millions’ of Britons, regulator warns

The merger of telecoms giant Vodafone and the UK operations of Three would lead to higher mobile bills for “millions of mobile customers”, the UK competition watchdog has warned.

Vodafone and Three, which announced the £15bn deal last year, are being forced to address a range of issues raised by the preliminary findings of an in-depth investigation by the UK’s Competition and Markets Authority.

The CMA on Friday raised concerns about higher bills and poorer customer service, as well as a “significant reduction in competition” due to the reduction in the number of mobile network operators in the UK from four to three.

Vodafone UK and Three UK say the joint venture is vital to “fixing” the country’s “dysfunctional” mobile market, with the companies planning £11bn of investment in digital infrastructure.

The CMA said that while the deal could “improve the quality of mobile networks and accelerate the rollout of next-generation 5G networks and services”, there are doubts about the investment package promised by the companies.

It added: ‘The CMA currently considers that these claims are exaggerated and that the merged company would not necessarily have the incentive to continue with its proposed investment programme post-merger.’

In a joint statement, Three and Vodafone said they disagreed with the regulator’s assessment, promising that “prices will remain largely the same or even fall after the merger.”

The companies said the deal would improve market competition and investment and bring “the best 5G to every community, school and hospital in the country.”

According to an analysis by Opensignal cited by the companies, the UK currently ranks 22nd out of 25 European countries for 5G availability and speed, and has the lowest data speeds of any G7 country.

However, Vodafone and Three say the deal would deliver “better quality, greater capacity and wider coverage for more than 50 million mobile customers across the country”.

They said: ‘By all standards this merger is pro-growth, pro-customer, pro-investment and pro-competition. It can and should be approved by the CMA.’

Vodafone CEO Margherita Della Valle added: ‘Our merger is a catalyst for change.

“It is time to release the handbrake on the country’s connectivity and build the world-class infrastructure the country deserves.

‘We offer a self-funded plan to boost economic growth and tackle the digital divide in the UK.’

The companies will now enter into discussions with the CMA to explore possible solutions to the CMA’s concerns, ahead of the final decision on 7 December.

What implications does the deal have for the UK mobile market?

The need for investment in digital infrastructure in the UK is widely recognised.

Vodafone appeared to have been given the green light for the deal by ministers in the previous Conservative government, after the company was ordered to set up a national security commission to “oversee sensitive work” following the merger.

It came amid a national security investigation into concerns over Three’s ties to China, as Three is owned by Hong Kong group CK Hutchison.

Robert Finnegan, CEO of Three UK, said the UK mobile market with four players was “dysfunctional and there is a lack of quality competition, with two strong players and two weak players”.

He added: ‘This is reflected in the current state of the UK’s digital infrastructure. Everyone agrees that it falls far short of what the country needs and deserves.’

Matthew Howett, founder and CEO of London-based analyst firm Assembly, said the CMA’s concerns about prices were “solvable”, saying the UK already has some of the lowest 5G costs of any country.

He added: ‘A legally binding commitment to the promised £11bn network investment, overseen by Ofcom, would be a win not only for consumers and network quality, but also for the new Labour government.

‘As the EU struggles to compete with the US and Asia, the UK’s position on the international stage must be taken into account.

(Former ECB President Mario) Draghi outlined the importance of infrastructure and connectivity to this story in his report this week, and it is encouraging that the CMA has essentially come to the same conclusion.

‘With the UK economy not growing and the new government’s key mission being to deliver sustainable economic growth, success or failure depends on private sector investment.’