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Vodafone-Three merger could mean higher prices

Vodafone-Three merger could mean higher prices
Emma Lunn
Written By:
Emma Lunn

The Competition and Markets Authority (CMA) has warned that the planned merger between the two mobile operators to create the UK’s largest mobile phone operator could leave customers worse off.

The competition watchdog said the deal could lead to higher prices for consumers and businesses and affect investment in UK mobile networks.

Vodafone and Three announced a new joint venture agreement last year that would bring their 27 million customers under a new, single network provider.

The CMA launched its initial ‘phase 1’ investigation into the deal in January. This 40-working-day review is designed to identify whether the deal may lead to a “substantial lessening of competition” and therefore require an in-depth, ‘phase 2’ investigation. Phase 2 investigations allow an independent panel of experts to probe initial concerns identified at phase 1 in more depth.

The CMA’s phase 1 investigation found that Vodafone UK and Three UK provide important alternatives for mobile customers. Both have made significant investments in their networks in recent years, including the roll-out of 5G. Three is also generally the cheapest of the four mobile network operators.

The CMA is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers. It pointed out that competitive pressure can help to keep prices low, as well as provide an important incentive for network operators to improve their services.

The CMA is also concerned that the deal may make it difficult for smaller mobile ‘virtual’ network operators such as Sky Mobile, Lebara and Lyca Mobile to negotiate good deals for their own customers.

When announcing the deal last year, both Vodafone and Three claimed that combining both businesses would result in significant benefits to customers as well as speed up the deployment of new technologies.

Millions ‘depend on effective competition’

Julie Bon, phase 1 decision-maker for this case at the CMA, said: “Millions of people in the UK depend on effective competition in the mobile market in order to access the best deals for them.

“Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims.

“Our initial assessment of this deal has identified concerns that could lead to higher prices for customers and lower investment in UK mobile networks. These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”

Both Vodafone UK and Three UK have five working days to respond to the CMA, otherwise the deal will be referred to a phase 2 investigation.