Vodafone-Three merger faces watchdog probe

Unions believe bills will rise, but companies dispute it

The Competition and Markets Authority (CMA) is preparing to investigate the proposed merger between Vodafone and Three, which would create the UK's biggest network telco of 27 million customers.

The watchdog will scrutinise if the deal could harm consumers by either leading to reduced choice or higher prices.

The firms confirmed that the deal, announced last year, would result in an additional £11bn investment in the UK.

Vodafone UK chief executive Ahmed Essam said, "We strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players."

Three has said the deal would speed up the rollout of 5G, and give customers more reliable coverage. Chief executive Robert Finnegan said, "Thanks to this transaction, 95% of the population and every school and hospital will be covered by standalone 5G by the end of the decade.

"We are confident that this transaction will deliver significant benefits to our customers, the country and competition, and we look forward to working closely with the CMA as they review our notification."

However, the Unite union has estimated that bills will rise - by as much as £300 per year - if the merger goes ahead.

Previously, Three general counsel Stephen Lerner told the Business and Trade Committee there would be "no merger related price rises," and was confident that the CMA would approve the deal.

Paolo Pescatore, analyst at PP Foresight, expects the firms to make some concessions to the regulator. He said, "The [merged] entity would have to provide solutions in areas like network sharing, rather than create another problem for the market.

"While a precedent has already been set following the failed Three/O2 deal, let's see if the authorities have a change of heart.

"Both parties need to demonstrate that this is genuinely in the interest of UK plc, the economy, and consumers for it to have a chance of getting over the line."

The CMA has reached out to third parties, including other network operators, to present their views on the planned merger and its possible effect on competition.

CMA chief executive Sarah Cardell added, "This deal would bring together two of the major players in the UK telecommunications market, which is critical to millions of everyday customers, businesses and the wider economy.

"The CMA will assess how this tie-up between rival networks could impact competition before deciding next steps. We now have 40 working days to complete this formal Phase 1 investigation, before publishing our findings and any next steps."