04 April 2024 , 07:44
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The planned merger between mobile networks Vodafone and Three, worth £15billion, will have to face a detailed probe by the Competition and Markets Authority (CMA), because of worries about how the deal might affect competition.
The CMA, after being informed that no measures would be taken to address its concerns before the deadline, confirmed that it would initiate what's known as a Phase 2 investigation. Last month, the CMA warned that the deal could have "substantial" impact on competition, potentially leading to increased prices and possibly lowering the quality of service.
It gave the companies until April 2 to tackle these concerns. Vodafone and Three first made public their plans for this huge merger last summer, which would result in the creation of the UK's biggest mobile phone network.
If the deal is successful, Vodafone, a FTSE 100 company, and CK Hutchison, owner of Three, plans to blend their UK operations, therefore creating a business serving about 27 million customers, bolstered by more than 11,500 staff members. The merged company will see Vodafone holding majority ownership with 51% of the business, while the rest will be owned by CK Hutchison.
Both firms have defended their decision to merge as they believe it will allow for increased investment, making them more competitive against top rivals like BT, the operator of EE, and Virgin Media-O2. However, the CMA revealed its worries over the effect of merging two of the UK's four largest mobile networks after carrying out an initial phase 1 investigation into the move in January and reiterating these concerns on March 22.
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The regulator revealed that their initial investigation found Vodafone and Three to be significant alternatives for mobile customers. They expressed concern that the merger could lessen competition for new customers.
The watchdog also voiced worries that the deal "may make it difficult" for smaller mobile operators like Sky Mobile, Lebara and Lyca Mobile to negotiate favourable deals for their customers. This is due to a reduction in the number of mobile network operators available to host them.
Vodafone hinted last month, after the CMA's initial findings, that it was preparing for a second phase of the probe. Experts have suggested that the two companies were unlikely to propose measures to alleviate competition concerns by the April deadline. This would have allowed the regulator to conclude its investigation.
Alex Haffner, a competition partner at UK law firm Fladgate, stated last month that the pair would "probably have to give up more ground at this stage than later on in the process".