Vodafone and Three merger could lead to ‘higher prices and ‘reduced quality’, warns watchdog

By Staff

The two mobile firms have argued the deal will allow them to increase investment and better compete with major rivals, EE operator BT and Virgin Media-O2

The competition watchdog has warned that the proposed merger between mobile networks Vodafone and Three could result in “higher prices” and “reduced quality” for customers.

The Competition and Markets Authority (CMA) stated that unless both companies can address their concerns, the deal will face a thorough investigation. Last summer, Vodafone and Three announced their £15 billion merger, which would create the UK’s largest mobile phone network.

They argue that the deal will allow them to increase investment and compete more effectively with major rivals like EE operator BT and Virgin Media-O2. However, the CMA launched an initial investigation into the move in January and expressed concerns on Friday about the impact of merging two of the UK’s four largest mobile firms.

The regulator said it found in its initial probe that the two companies are important alternatives for mobile customers and combining these two businesses will reduce rivalry between mobile operators to win new customers. Julie Bon, Phase 1 decision-maker for this case at the CMA, said: “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 which 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.”

The watchdog also raised worries that the deal “may make it difficult” for smaller mobile operators such Sky Mobile, Lebara and Lyca Mobile to negotiate good deals for their own customers, by reducing the number of mobile network operators who will host them. Vodafone and Three have said they will look at the CMA’s worries and will “engage constructively” with the regulator.

Vodafone UK chief executive officer Ahmed Essam said: “Having reached this important milestone, we look forward to working with the independent panel on the phase two process. By merging our two companies, we will be able to invest £11 billion to help the UK realise its ambitions to be a world leader in next-generation 5G technology and increase competition across the industry.”

“This transaction will create an operator with the scale required to take on BT/EE and Virgin Media-O2, give MVNOs (mobile virtual network operators) greater choice in the wholesale market and is in the wider interests of customers, competition and the country.”

Three UK chief executive officer Robert Finnegan said: “The current market structure is holding the UK back, which is not good for customers or competition. By creating a third player with the necessary scale to invest, the combination of our two companies will deliver one of Europe’s most advanced networks and move the UK into the digital fast lane, benefiting customers from day one.”

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