Just weeks after the UK Competition and Markets Authority (CMA) has warned that a proposed merger between mobile network operators Vodafone and Three is likely to lead to higher prices and reduced service, and has now offered telcos a path that could address competition concerns by investing in networks and protecting customers.
Specifically, A Therapeutic worksheet It has provisionally found that a multi-billion pound commitment to upgrade the combined company’s network across the UK, including the rollout of 5G technology, along with customer protection in the short term, could resolve the competition concerns identified in September 2024 and allow the merger to go ahead . .
Vodafone and Three first announced plans to merge in June 2023, a move seen as a response to BT’s purchase of EE in 2016, and the merger of Virgin Media and O2 in 2021 to form VMO2.
The combined company will have 27 million mobile subscribers in the UK. Three UK and Vodafone justified the merger by saying it would boost the rollout of 5G infrastructure and allow greater scale to compete with larger, converged telcos and mobile operators in BT/EE and VMO2.
The CMA launched an investigation into the merger in October 2023, and said in its latest update that “tens of millions” of mobile customers could see the cost of their mobile packages rise or services such as data allowances fall.
While it acknowledged that the merger could improve the quality of mobile networks and accelerate the deployment of next-generation 5G networks and services, the CMA added that it considered these claims to be “exaggerated,” and that the combined entity “does not necessarily have an incentive to pursue its proposed investment program.”
The CMA also found that a wholesale market where virtual operators – such as Sky Mobile, Tesco Mobile, Lebara, Lyca Mobile and iD Mobile – resell airtime from the four network operators could see worse deals through reduced competition from four to three suppliers.
At the same time, the CMA also consulted on ways to address its concerns – known as remedies. the Therapeutic worksheet It sought opinions on the effectiveness of the proposed remediation package, and provisionally found that a legally binding commitment to implement the network integration and investment program proposed by Vodafone and Three would significantly improve the quality of the combined company’s mobile network, enhancing competition between mobile networks. Long-term operators benefit millions of people who rely on mobile services.
However, the CMA also found that short-term safeguards are needed to ensure that retail consumers and mobile virtual network operators are able to continue to secure good deals during the early years of network integration and investment deployment.
Today’s proposed remedies require Vodafone and Three to implement three key actions. First, they will have to submit their shared network plan, which sets out the network upgrade and improvements they will make through significant levels of investment over the next eight years across the UK. This will be a legal obligation overseen by the UK Telecommunications Regulatory Authority Ofcom And the Capital Markets Authority.
Second, they will have to commit to keeping some existing mobile tariffs and data plans for at least three years, a measure the CMA said would protect millions of existing and future Vodafone/Three customers (including customers on their sub-brands) from short-selling. The term price increases in the early years of the network plan. Finally, they will have to adhere to pre-agreed prices and contract terms to ensure that MNOs get competitive wholesale deals.
“We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed,” said Stuart McIntosh, chair of the CMA’s investigative group leading the probe.
“Our interim 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 enhance competition in the long term, and additional measures would protect consumers and customers of Wholesale while implementing network upgrades.
The Capital Markets Authority stressed that its announcement was temporary, and the final decision is scheduled to be made before the legal deadline set for it on December 7.
