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Study Suggest Vodafone and Three UK Merger Won’t Harm Consumers

Tuesday, Dec 5th, 2023 (2:55 pm) - Score 7,360

A new meta-study from consultancy firm Compass Lexecon has examined markets where mergers reduced the number of primary mobile network operators from 4 to 3 and found little evidence to suggest that they harm consumers, which could bode well for Vodafone and Three UK’s proposed, if still somewhat controversial, tie-up.

The proposed merger, which would see Vodafone hold a 51% slice of the business and CK Hutchison (Three UK) retain 49%, has been promoted 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 (broadband) infrastructure and network coverage.

NOTE: The combined business aspires to reach more than 99% of the UK population with their 5G Standalone (SA) network by 2034 and push fixed wireless access (mobile home broadband) to 82% of households by 2030, among other things.

However, regulators and some politicians are known to be cautious, particularly given the concerns over any potentially negative impacts upon competition (e.g. both at retail and wholesale) and consumer prices that may result from having fewer operators. Not to mention some fears over national security (i.e. Three UK is owned by CK Hutchison, which is perceived as being closely tied to China) and the risk of job losses (here and here).

On the flip side, both operators have argued that the deal would improve network quality, service coverage and that merger related price changes are “not part of the transaction rationale, and we are not planning any increases in prices” (here). Having said that, the operators also once said they had “no plans” to reintroduce EU roaming charges, until they did.

The new study from Compass Lexecon, which has been promoted by the aforementioned merger parties, examines 25 empirical studies of similar mergers in other countries (Austria, Ireland, Germany and the USA) to see if they resulted in consumer harm (particularly around pricing). The research looked at the relationship between mobile market concentration and prices, investment and quality in order to discover whether earlier mergers impacted the rate of decline in average revenue per GigaByte (GB) of data (mobile broadband) consumed.

We find that when the empirical literature is considered in the round, previous four-to-three mergers typically had little effect (if any) on prices and led, in many cases, to significant improvements in the quality of the merging parties and better national average network quality relative to other countries. We also find that the average revenue per gigabyte consumed (as a measure for quality-adjusted prices) generally fell either at a faster rate post-merger or at a similar rate as pre-merger,” said the report.

Summary Points

➤ These mobile mergers have had little impact on prices, typically having no effect at all, or increasing prices for some customers for a short period only.

➤ The impact of these mergers on industry investment and mobile service quality has generally been positive for consumers, for instance by extending network coverage and/or increasing download speeds.

➤ With limited effect on prices and better quality, the 4-to-3 mergers since 2010 appear to have provided customers with better value for money. Across the industry, quality-adjusted prices (measured by average revenue per gigabyte of data) have been falling for many years. Of the countries assessed in the meta-study, this downward trend accelerated post-merger in two countries (Austria and Ireland), continued to fall at the same rate in three countries (Germany, Italy, and the US), and did not fall as fast post-merger in the sixth (the Netherlands).

➤ Studies examining the effect of concentration on price and quality have come to differing conclusions on whether there is any systematic relationship and, if so, the nature of that relationship. The differences in results reflect a range of reasons including differences in the groups of countries being considered, different time periods, different price and quality measures and different methods to control for other factors.

At this point it’s worth noting that the study is by no means comprehensive and doesn’t really extend into other areas, such as the impact on consumer pricing at MVNO providers, job losses or issues of security (the latter is a more complicated consideration) etc. National security concerns would be a matter for the UK government, which could intervene under existing laws, but has thus far not shown any real interest in such a course of action.

Similarly, it’s worth noting that the Competition and Markets Authority (CMA), which is currently assessing the deal, cannot consider all effects that the merger might have. The CMA’s focus is on competition, not employment, access to personal data or security.

One other consideration here is the degree to which any concessions demanded by each market’s competition regulator may have impacted on the outcome, but on a quick scan the new report doesn’t appear to have delved too deeply into that. Both Vodafone and Three UK aim to complete their merger by the end of 2024, regulatory approval allowing.

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By Mark Jackson
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 and .
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36 Responses
  1. Avatar photo Mad Dog says:

    Sounds like a report paid for by a party with a vested interest in a particular outcome

    1. Avatar photo Richard Branston says:

      What is their vested interest? Easy to say that so what’s the proof to support your claim?

    2. Avatar photo Mad Dog says:

      Obviously the implication is the party with the vested interest is either 3 or Vodafone, their interest being to smooth the path to merger with fairytale claims about prices not going up etc. Are you an employee of 1 of these companies, or just very naive?

    3. Avatar photo Buggerlugz says:

      Beat me to that comment. Agreed.

  2. Avatar photo anonymous says:

    “A new meta-study from consultancy firm Compass Lexecon has examined markets where mergers reduced the number of primary mobile network operators from 4 to 3 and found little evidence”

    So, not enough data sample sets? Data from environments where an EFFECTIVE watchdog (not unelected quango) exists to properly regulate amd actually do something where there are less operators?

    Yep, this report is only worthy for someone’s ass to be wiped across it.

    Less competition = less competition and one or two left in a cartel racket.

  3. Avatar photo Gregowski says:

    I don’t understand how this will effect people in negative way, some people are saying prices will go up etc.

    Right now we have loads of virtual networks that from a average customer point of view offer exactly same service as their ‘mother networks’ for half the price sometimes even cheaper. Would they stop after the merger and put all prices up? I don’t think so.

    1. Avatar photo anonymous says:

      Gregowski, simply cannot believe you wrote what you wrote.

      VMOs are subject to the parent non-VMO terms and conditions and tariffs. These can easily be changed and increase upon renewal hence why so many came off EE originally.

      You really think that Voda, a network that has always been expensive, and in my opinion, questionable customer service aren’t going to love doing away with anything in customer benefit? Cheap tariffs will go, data amounts will go down, etc etc. It will all be sold under “investing in the network to being you a great service” followed by a fob off of alleged benefits for the Voda “VeryMe” as a reason not to cry into one’s sleeve.

    2. Avatar photo Anon says:

      Currently the best networks for MVNOs in terms of data are Vodafone and Three. If both merge to create a better network, why would they continue to offer current prices? Keep in mind that Vodafone will own 51% of the new network (and are in charge) and consider that:

      1) They’ll be better, will be able to charge more, and have no interest in overselling their new fancy network (like EE did for years).

      2) O2 doesn’t want more users on their struggling network.

      3) EE isn’t known for being generous.

      Will MVNO prices increase right away? No, but eventually their contracts will end and they’ll have to pick one of the 3 networks. Look at the plans of O2 and EE MVNOs… why would Vodafone-Three undercut them so much after they’re the largest network in the UK?

      O2 can’t take Three’s position due to a lack of capacity and incentive (they’re huge). Maybe EE will? Currently the only MVNO on EE with similar offers is Lyca… but they come with a few asterisks (reduced priority/speeds in areas with higher load, no full access to all bands so worse coverage, etc)… everyone else is far from Smarty/IDMobile/Lebara/Talkmobile.

      I think we’ll either pay the same for less data or pay more for the same just because of what the 3 networks will want to offer, which is different from the mergers in Ireland or Italy.

    3. Avatar photo tech3575 says:

      One potential negative is that they start shutting down masts which could negatively impact users.

      IIRC this happened after the Orange/TMobile merger.

      That said, the opposite could also happen, such as the recently built Three own masts where I live in a rather poor Vodafone area, so who knows outside of VodaThree.

  4. Avatar photo John says:

    Sounds as legitimate as Khan paying a report to sell the lie that his car tax makes the sun happier

    1. Avatar photo dg says:

      There’s nothing illegitimate about commissioning an independent report, even if it does come out in support of your position. Something proving your opponent correct doesn’t mean it’s inherently false. Legitimacy doesn’t come from who asks for the report, it comes from the quality and veracity of the data. And if you’re questioning independently collected and verified data, without data of your own, it’s you whose legitimacy should be questioned.

    2. Avatar photo Buggerlugz says:

      Its the “commissioning an independent report” with a “this is the conclusion we’d like you to reach” so if you’re interested, we’ll pay you this much….I think that’s what both he and I believe to be the case.

  5. Avatar photo Jim says:

    I echo the many comments arguing that the veracity of a survey commissioned by voda/3 is clearly going to be in their favour.

    2 drunks propping up a bar springs to mind

    Nothing good will come of this merger if cleared. The orange tmobile should also never have been waived through. A precedent has been set so I expect that the merger will be given the go ahead

    I can’t stand all the pr nonsense saying it’s good for the consumers and country. It’s clearly for the shareholders benefit

    1. Avatar photo - says:

      The thing is, they allowed orange and T-Mobile way back when into EE and since then EE into BT, 02 into virgin. The reality is that they will end up saying yes to this, they don’t have very much choice.

      Personally I think it would actually be preferable to do it on the condition of regulated wholesale access or something like that. The main issue here is that retail ‘competition’ outside of the big 4 only exists because it is permitted by the big 4, they could elect to double the price to Thier mvnos tomorrow and the regulators couldn’t really do anything so long as they don’t collude with eachother.

      Having one big regulated operator, not too different to openreach, and then EE, and possibly 02 (each arms of the incumbent broadband providers) as a separate commercial operator could be really interesting.

    2. Avatar photo Ivor says:

      they don’t have to say yes every time just because they said so years ago.

      T-Mobile/Orange had the benefit of being first, a benefit O2/3 did not have (rejected) and that is also the case for Voda3. The government seems to be taking a harder line on these matters than in the past.

      BT/EE is irrelevant – BT didn’t own a meaningful mobile network and EE did not own a meaningful home broadband network (the technical side was in fact outsourced to BT Wholesale anyway). There was no real overlap.

  6. Avatar photo Tom says:

    Out of the “examples” they give of Austria, Ireland, Italy and Germany and the USA, 4 of these countries have either a new entrant in the market or one trying to enter. Italy has Iliad and provides significant competition, Austria has Spusu attempting to build their own network, Germany has 1&1 (although this has gone a bit quiet…) and the USA has Dish Wireless. The only one where no one else has entered is Ireland, but I believe there were regulated requirements over pricing/MVNO access there.

    There’s no indication any new network will build out in the UK to compete with a combined 3 players…

    1. Avatar photo Pádraig says:

      Iliad bought Eir in Ireland and started a new budget network using the existing Eir Mobile (Meteor) infrastructure originally offering an Unlimited Plan for €9.99 per month.

      Iliad is known for its budget offerings across Europe so its takeover of Ireland’s third network meant a budget offering was highly likely. Vodafone UK is not known as being “budget” so the likelyhood of them maintaining the cheapest offerings from the Three / Smarty portfolio is slim.

    2. Avatar photo x_term says:

      Italy is a very strange country, I wouldn’t use it as a great example… also, there’s going to be big changes soon there, as vodafone is selling the business and exiting the market after they self destructed their revenues by chasing iliad with low cost offers, the street price for 150-200GB in 5G and unlimited minutes today is around 10€ a month for both, with vodafone tho having all the added costs of a big MNO. There’s rumors they will be purchased by Fastweb (an MVNO at the moment with MNO aspirations) so a reduction from 4 to 3 operators and Fastweb becomes dual play for the first time (Italy doesn´t have cable, no triple play exists).

  7. Avatar photo DD says:

    Is EE better value than what Orange / T-Mobile was? Appreciate data demands are different, but prices have rapidly climbed in the last 10 years.

    1. Avatar photo Jamie says:

      Orange I remember being pretty pricy, but tmobile was defo a good price for consumers.. I remember getting “unlimited” FUP that never appeared to apply, data on pay and go, £20 for 6 months.. I remember getting a simialr unlimited however 4mbps speed cap on contract for sub 30 with an iPhone 5.. then EE came along and I couldnt renew.

    2. Avatar photo Richard Branston says:

      “Is EE better value than what Orange / T-Mobile was? ”

      In 1995 15 minutes of call time on Orange – with no texts and no data cost £15 a month.

      Using the Bank of England Inflation Calculator – £15 in 1995 costs £29.47 today when adjusted for inflation.

      Today £22 on EE gets you unlimited calls, unlimited texts and 200gig of data – the price has reduced by around 1/3 in real terms and the services provided have massively increased.

    3. Avatar photo anonymous says:

      Not as easy as just shoving inflation on top of a published full price plan.

      Retentions deals on both orange and T-Mobile for me were generous back in the day. EE are known for not being generous in this area as a rule now, and a merger of a value provider with Voda will mean any decent retentions offers will disappear.

    4. Avatar photo DD says:

      EE is more expensive than O2 and Vodafone though. Vodafone and O2 offer high data deals through third parties, EE appear to only offer deals directly and I don’t think they’re as competitive in comparison. Orange offered something different at the time. Orange Wednesday’s was huge. Once you start removing competitors there’s less incentive to be innovative.

  8. Avatar photo Peter says:

    Of course it will harm consumers, the less competition the higher prices

  9. Avatar photo Martyn says:

    I’m looking forward to roaming between Vodafone and Three been activated for the good of the country, the millions of customers and businesses alike – and then I woke up!

  10. Avatar photo Martyn says:

    Good to see a report highlighting the fact the merger is actually good for UK PLC, just wish they speed up the process and merge tomorrow.

  11. Avatar photo Richard nuth says:

    well three has the latest gear and best 5g spots…. and voda has the best network for voice calls so sure 🙂

  12. Avatar photo Bert says:

    they dont need to plan any prices increases, it will happen regardless so I cant see why they are using that quote to pacify its customers.

    I can;t trust vodafone to produce accurate bills so if they take over billing and mess it up i’ll be off

    1. Avatar photo Buggerlugz says:

      Yeah upto 14% every April……..that being the norm these days.

  13. Avatar photo anon says:

    So when H3G tried to take over O2 the regulator said it might stifle competition and raise prices. But when Vodafone wants to take over three, it’s fine and the regulator has no issues. Are there bribes going on here or something? how can one taking over another be bad, yet another one doing the same thing is fine ?

  14. Avatar photo Spotify95 says:

    Hopefully this merger goes ahead, as we need another network to perform well in all areas. Three have great 5G where they are rolling it out, and Vodafone have decent 4G in most (but not all) areas. Adding Three’s and Vodafone’s capacity together would give good coverage and capacity for 4G and blazingly fast 5G.

    As things stand currently, EE claim to be the UK’s best, and in theory they are, but that’s only because:
    1) Three have ropey 4G/reliant on 3G in areas served by 4G on other operators- they’ve gone for thin low band coverage from as few masts as possible
    2) O2 cannot develop in the West due to Cornerstone limitations with Vodafone – VF host, so develop to their likings.
    3) Vodafone cannot develop in the East and deploy their full capacity bandwidth due to Cornerstone limitations with O2 – O2 host, so develop the sites to their likings.

    Therefore, with no one able to stop EE, it’s time for change. Vodafone and 3 merging might just be the thing needed.

  15. Avatar photo John says:

    We need more competition not less.

    I hate Three and I’m with Vodafone. I’m praying the ‘merger’ doesn’t happen but there’s an opportunity for some people to make a lot of money, so it’ll probably go ahead.

  16. Avatar photo jason says:

    Wont harm anyone , 2 bad providers merging is just going to make their customer service issues even worse . Good luck !

    1. Avatar photo Anon says:

      Those 2 bad providers are good enough for a lot of people… merging to create a better, more expensive network will harm those who don’t want or can’t pay more.

  17. Avatar photo Gulzar says:

    If you go to this merger,then monopoly is there according to the prices, Beacuse i have a lot of experience of two operator’s merger at technically side.
    Best for compnies as well as customers if any body govern the price mark values

  18. Avatar photo D gom says:

    I hope will not never happen,after they merge together no more competition so you like customer have no choice.this people got pay probably by Vodafone or three to come with this crap up.BIG NO FOR MERGER

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