Security Concerns Dominate UK Parliament Debate on Vodafone and Three Merger
A meeting in the House of Commons (Parliament) was held yesterday that saw MPs from various different parties debate the proposed merger of Three UK and Vodafone (here), which highlighted how the dominant concerns for MPs centre around issues of national security, job losses and the risk of higher prices for consumers.
The merger, which would see Vodafone hold a 51% slice of the business and CK Hutchison (Three UK) retain 49%, has thus far been promoted by the operators as something that would be “great for customers, great for the country and great for competition,” while also resulting in a major £11bn investment to upgrade the UK’s 5G mobile infrastructure and network coverage.
However, regulators and politicians previously tended to discourage mergers that reduced the number of primary mobile operators to three, largely due to concerns over the impact on competition and consumer prices. But that changed in 2020 after a ruling by the European Court of Justice (here) found that having only 3 operators still made for a competitive market.
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On top of that, investing to build national 5G and future 6G networks becomes a lot easier – delivering key benefits in areas of network performance and coverage. But such a large merger may still need to make concessions in order to fend off against regulatory concerns.
Meanwhile, nearly all the MPs taking part in yesterday’s debate clearly had some big concerns, typically around the core issues of national security, job losses and pricing. But only a few remarks were made toward the positive improvements in network coverage that may result.
Navendu Mishra (Labour) said:
“In July, it was announced that Vodafone and Three UK had agreed to combine their businesses, in an effort, they claim, to create one of Europe’s leading 5G networks. Although I welcome the aspiration, such a deal will have terrible consequences, with higher prices for consumers, job losses alongside inflated corporate profits, and a threat to the UK’s national security.
When Vodafone and Three merged with TPG in Australia in 2020, they claimed that it would accelerate the benefits of substantial network investments made by both companies, when in reality investment levels across the sector are down by 45%.
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Evidence suggests that there is extensive collaboration between the CK Group, the Li family that controls it and the Chinese state. It is well documented that the Li family has strongly backed pro-Beijing hardliner John Lee as the Chief Executive of Hong Kong, and supported a draconian new security law that would suppress dissent. On top of this, top CK Group executives sit on Chinese Government committees and have access to the inner circle of the Chinese elite. Does the Minister feel comfortable with a hostile foreign actor potentially having access to millions of UK citizens’ data?”
Sir Iain Duncan Smith (Conservative) said:
“On the security issue—as the hon. Gentleman knows, I have been sanctioned by the Chinese Government, like others—I am concerned that there should be full and due diligence on such a merger, particularly given the Cheung Kong Group and the Li family being so knowingly involved with Chinese Government committees, their contacts in the Chinese Government and having to pass data over under the national security law.”
Jim Shannon (DUP) said:
“One big selling point is that under the proposal, the merged company is expected to deliver 5G coverage to nearly 99% of the UK population, which is huge and important.
Constituents contact me regularly about rural network coverage—broadband signals or on the phone network. My constituency of Strangford is rural. I live in the country, so I am fully aware of the issues that some families still have with 5G connection. It can go from working in certain areas of the house to not working at all—people tell me about it every week in my constituency. That leads to consumers paying extortionate amounts for wi-fi and not getting the service that they deserve.
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The comment has been made that the merger will make mobile bills less affordable. That cannot be ignored. We have already had a couple of years in which price increases have been quite significant, and have hit us all. If the merger closes the market to a number of companies, prices may go up.
For all our constituents, whether the merger will impact them or not, the issues, including price hikes, security and convenience, must be spoken about.”
Carol Monaghan (SNP) said:
“Under the Chinese Government’s state security laws, it would be possible for the personal data of all users of the new merged company to end up in the hands of the Chinese Government. That is bad enough, but Vodafone holds UK Government contracts for the NHS 111 helpline, the Ministry of Justice and the Ministry of Defence.
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Security is one thing, but there are other concerns, as a number of Members have pointed out. What would the merger, and any further monopoly of the telecoms market, mean for consumer costs, consumer choice and job security in the UK? The merger would result in nearly half of all UK consumers falling into the company’s market share. As the EU has previously warned when blocking similar mergers, that could harm consumers and give free range for price hikes.”
Sir Chris Bryant (Labour) said:
“As others have said, it will always be a matter of concern when two operators merge, taking the number from four to three, and especially so when that creates an operator with 27 million customers; it would be the largest in the field. That intrinsically implies that there will be less competition in the market, and that consumers might face higher charges.”
The Government’s Minister for Data and Digital Infrastructure, Sir John Whittingdale, replied that he was somewhat limited in his ability to respond to many of the biggest concerns in detail. This is partly because competition policy must be determined by an independent regulator, meaning the Competition and Markets Authority (CMA).
The CMA may then also trigger a fairly new process under the National Security and Investment Act (NSIA), which would look at the aforementioned security concerns. Matters of national security are typically confidential discussions.
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Sir John Whittingdale said:
“[This] gives me an opportunity to say something about the importance of mobile connectivity and 5G technology, which has enormous potential to transform public services and make our workplaces more effective, connecting healthcare workers, vehicles, traffic flows and so forth.
We reckon that widespread adoption of 5G could bring £159 billion in productivity benefits across sectors by 2035. The Prime Minister has set out the UK’s ambition to be the leading science and technology superpower by 2030. If we are to achieve that aim, connectivity will play a critical role. To reach that point, we will rely heavily on investment by the mobile companies, and we are in regular dialogue with them.
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In general, the Government welcome investments into the UK that will support growth and jobs, meet our legal and regulatory requirements, and not compromise our national security, but as everybody who has participated in the debate has stressed, the security of critical national infrastructure is of prime importance.
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The hon. Member for Stockport and others expressed concern about the potential impact on jobs. That is essentially a commercial matter for the company. Yes, Vodafone has announced the loss of 11,000 jobs globally over the next three years, and obviously that is a matter of regret. Those are difficult decisions, but they are commercial decisions for the company. There is no reason to believe that the merger will add to that number. Again, that will be taken into account in the examination of the case for the merger.
The hon. Gentleman referred to analysis by Unite the union on what happened when a similar merger took place in Australia. However, every market is different. We cannot extrapolate from what happened in Australia, where there were different timings, a different state of the market and different network providers, to reach conclusions about the impact here.
On price rises, we recognise that this is a difficult time for many people, who face significant challenges with the cost of living. I would like to take this opportunity to pay tribute to the mobile operators, including Three and Vodafone; they have done a lot to try to support consumers through these difficult times, not just during the rise in the cost of living, but throughout the pandemic, in particular by bringing forward social tariffs for those on low incomes, donating millions of gigabits of data to the National Databank and providing devices through the National Device Bank.”
The full debate can be read here, although as the government correctly points out, the decisions about all this will ultimately be up to the regulators.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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If CK Hutchison is a national security risk, then why are they allowed to operate in the UK at all?
Because they don’t have any contracts that involve national security. Vodafone do. Vodafone have contracts with central government, the Ministry of Defence and have just been awarded the smart meter contract to name but a few areas where there could be concerns. Three, well they just tend to deal with consumers and every day businesses.
Hutchison owns ports and utility networks as well as 3. I’d imagine there are national security concerns in there. Especially Superdrug!
So if they can’t own a share in a mobile network, should they be allowed to own Felixstowe Port or the electricity network for much of the east and south east of England?
Totally agree. CK group should be shut down by the government and given marching orders. Who knew they were a cartel ran by the Chinese government? (oh…everyone.)
@Ivor
Personally, I don’t think there’s an issue with businesses based in China or Hong Kong owning infrastructure in the UK. It is right, however, that where there are new national security concerns that these are thoroughly scrutinised.
In the case of the vodafone/3 merger the final entity will be a UK based and regulated business, effectively controlled by Vodafone that has a major chinese shareholder. It seems unlikely that it could be used for anything nefarious as it will be far removed from the chinese government. Not that I believe 3 do anything untoward at the moment, mainly for the same reasons.
It appears that Jim Shannon (or perhaps I should say the honourable member for Strangford) has confused 5G coverage (the responsibility of the four mobile network operators) and home WiFi coverage (the responsibility of the homeowner). I hope they won’t base policy on this confusion.
Yes Ben…
It would appear Jim Shannon hasn’t got a clue what he’s talking about.
It could be amusing, but these people are the ones making decisions for our country.
That jumped out at me, too.
Unless NI is different to rural areas in other parts of the UK (and it’s not!), the issue is with 3G and 4G connection. Checking a Strangford BT30 postcode on signalchecker confirms the area has no 5G (though maybe a full postcode search might turn some up I suppose). Then wifi (expensive or not) is a positive boon for mobile communication.
I was just about to say the same thing. The man is clueless about most things though, so not a surprise. Where he lives in Strangford hasn’t got any 5G coverage, so it can’t work in some part of the house and not in others. He probably means 5GHz wi-fi
A lot of people confuse internet access (however it is delivered) with ‘wifi’. I suppose this isn’t helped by the fact that a lot of people’s interactions with their home router will be via the WiFi menu on their devices
@Ivor
You’ve never really come across Jim Shannon have you?
Unfortunately the eejit is my MP. To be fair he does comment alot in the house of commons, but most of it is irrelevant nonsense and shows his ignorance on lots of topics that he doesn’t quite grasp. My favourite thing was when he said that the Teletubbies could ‘transform North Korea’, before stating that he had never really watched telletubies but though it would be good if it was broadcast there anyway.
I really hope they kick this into touch from a consumer angle, we all know how this goes- promise the earth then when the deal is done, the price ramps up while the service level drops. It’s all just about making as much money as possible, screw the consumer.
and I can assure you either way this goes, its going to happen (Prices)… ask half the world DIRECTLY.
Totally agree
Totally agree with Mad Dog
I love when the argument about how mergers are terrible for consumers pops up, no one ever mentions that the Government didn’t seem as bothered when EE was created from Orange and T Mobile. And then no one was bothered when EE merged with BT Mobile.
Three have (rightly so) been particularly vocal that if they don’t merge, it’s simply not possible for them to compete anymore. The reality is the number of players in the UK market will likely reduce whether the merger goes through or not. The UK competition regulator has brought this on themselves, by waving through the creation of EE in the first place and then further allowing the merger of EE with BT.
Wasn’t it Vodafone who said that not Three? Three seem to be managing pretty fine on their own, we’re reminded everyday about how their 5G is real 5G!
The background to this deal is corporate wheeler-dealing, not an inability to compete based on scale. Let’s face it, all of these networks (or predecessors) were at some point building from scratch. All now have sizeable customer bases well above the threshold needed for mass market scale. Any “we can’t afford to invest any more, we’re too small” statements are pure, unadulterated lies.
Perhaps if Vodafone hadn’t offered such poor service they could have invested in the network instead of having to spend so much on marketing to attract new customers. And perhaps if Vodafone directors hadn’t been as hooked as a crack-addict when it came to huge, value destroying corporate deals, they’d have plenty of money in the kitty. CKH, well it’s just an opportunity to get out of the hard job of growing and operating a business – probably they’ll sell up as they did with Orange because they can think of a better use for a few billion quid than having it tied up in a UK telco (especially when it’s run by Vodafone’s lacklustre management.
Seems to me that the stage is being set to let this drift through, and then we’ll see the usual ramping of consumer prices, a further deterioration in customer service, the sacking of a few thousand employees, and zero benefits to consumers. The government will wash their hands and say “it were an independent regulator wot done it, don’t blame us”.
BT’s purchase of EE did not meaningfully reduce competition as BT did not own a mobile network and had no serious mobile efforts at that time (aside from a few SIMs as an MVNO on Vodafone, and some 4G spectrum they had yet to utilise)
IIRC BT did have to sell off some of that spectrum as a condition of sale, I believe to 3?
As for T-Orange, I suppose they had the advantage of getting in first.
@Mark, sadly not, Hutchinson have basically said if the merger doesn’t go through they are leaving the UK market regardless. And when you have parliament accusing you of essentially state sponsored spying why would you stay?
I’m starting to think there is a bias against Three but without any valid evidence…. then again everything now is just bias without any fabrication, just look at the media’s latest target and how cancel culture is now at corporate and political levels and not just on Twitter. (Oops I mean X…. :X)
Funnily some haven’t missed the fact whilst all the mainstream media were busy all week with a certain male celebrity, none of them reported on that bill being passed..
Ta Dah!
Says the government who just passed a law to ban encryption
Heh, was just going to say that.
Oh God not this fake it’s China spying on you BS. Ahh those standard plastic sunglasses were made in China!!! THEY ARE SPYING ON YOU!! Quick burn them nooowww..
That is literally the mentality of parliament these days, whilst they are no doubt busy spying on China just the same and happily seem to be following Chinas social control structure with social points systems and constant growing restriction on freedoms.
Meanwhile of course the entire British economy more or less relies on China and plenty of MP’s have got rich from that!
Can we not have someone sensible debate this merger? Not parliament? Sick of this hypocritical back stabbing anti democratic parliament.
Prepared for Hutchinson to ditch the UK market of the merger fails, and then you’ll only have three operators anyway. Why would they stay here, after the decades of investment they’ve made just to be constantly accused of state spying by parliament.
I agree – the ban / restrictions on Huawei was totally biased, they had objectively better 5g equipment; hence why they were being used in our network. They had no intention to “spy” on us.
+1
Huawei was banned for the same reason China doesn’t use our equipment in their infrastructure.
We shouldn’t mock the decision if we don’t understand the risks of having equipment or personnel from someone we don’t trust spread around the country.
@123 why would China or anyone want to use our equipment over theirs in their infrastructure? unless they want to have inferior outdated gear lol
As much as I would like a Voda3 Network… I think Voda/3 in Aus is a great example to what is going to happen.. Merge, still be the smallest network with the smallest coverage and lackluster deals.