Vodafone-Three merger could be cleared, says regulator

The £18 billion merger between Vodafone and Three to create Britain’s biggest mobile operator has been provisionally cleared by the regulator if the telecoms companies commit to large network investments and customer protections.
The Competition and Markets Authority said that a multibillion-pound legally binding commitment to upgrade the merged company’s network across the UK, including the rollout of 5G, combined with short-term protections for customers, could solve competition concerns identified by officials in September and allow the merger to go ahead.
The remedies require a joint plan from Vodafone and Three to upgrade the network over the next eight years overseen by both Ofcom, the telecoms regulator, and the CMA. They must commit to retaining some existing tariffs and data plans for at least three years to protect customers from short-term price rises. They are also required to commit to pre-agreed prices and contract terms to ensure that mobile virtual network operators — wholesale customers —can obtain competitive deals.
In mid-September officials found that a merger would mean tens of millions of customers facing higher mobile phone bills or a reduced service. They also found that the deal would harm Lyca Mobile, Sky Mobile and Lebara, which buy from the network operators to provide mobile services.
In late September Vodafone and Three UK proposed extra remedies to the regulator, in addition to a commitment to invest £11 billion.
The merger will reduce the UK market from four operators to three and has been met with opposition from the industry, including BT, which owns EE.
Stuart McIntosh, chairman of the inquiry group leading the investigation for the regulator, said that the deal had “the potential to be pro-competitive for the UK mobile sector if our concerns are addressed”.
He added: “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 and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”
The telecoms industry now has time to respond before the regulator makes a final decision on December 7.
Vodafone and Three welcomed the regulator’s update, with shares in the former rising 1.7 per cent, or 1¼p, to 73½p on the London Stock Exchange.
In a joint statement they said that the regulator’s update “provides a path to final clearance”.
“An appropriate balance appears to have been struck by ensuring that the significant benefits of the merged company’s investments can be realised in full and at pace to the benefit of the country and its citizens, while addressing the CMA’s stated concerns.”
They added: “The merger is a once-in-a-generation opportunity to transform the UK’s digital infrastructure — which lags significantly behind its European peers — and for more than 50 million UK customers to benefit from a vastly better mobile experience.”
The companies have argued that they need to combine to compete against EE and Virgin Media O2, which was created in 2021 in another blockbuster merger.
Kester Mann at CCS Insight, the research and advisory firm, said: “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 time to have it blocked before the CMA’s final deadline in less than five weeks.”