Competition Watchdog Investigates Vodafone and Three UK Merger UPDATE
In an expected development, the UK’s Competition and Markets Authority has today launched a formal Phase 1 investigation into the proposed mega-merger (here) between mobile operators Three UK and Vodafone, which will slash the number of mobile operators in the market from four to three and may impact upon competition, consumer prices, jobs and security.
The merger, which if approved would see Vodafone retain a 51% slice of the business and CK Hutchison (Three UK) hold 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.
However, some politicians and consumers are known to be cautious, particularly given the concerns over any potentially negative impacts upon competition (e.g. both at retail and wholesale) and higher 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).
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On the other hand, both operators continue to argue that the merger will improve their network quality, coverage and that any negative changes to consumer pricing are “not part of the transaction rationale, and we are not planning any increases in prices” (here). Having said that, both operators also once said they had “no plans” to reintroduce EU roaming charges, until they did.
The UK is not the first market to run into such concerns and EU regulators, as well as Ofcom, previously took the approach of blocking such deals. 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, although this isn’t a green light for approval and significant concessions may still end up being required.
Sarah Cardell, Chief Executive of the CMA, said:
“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.”
This review is designed to identify whether the deal may lead to a “substantial lessening of competition” and – if so – whether a more in-depth Phase 2 investigation is required. The reality with highly complex mergers of this size is that the CMA’s Phase 1 investigation will almost certainly raise concerns that lead to a deeper Phase 2 investigation, which we’d consider to be somewhat par for the course.
Robert Finnegan, CEO of Three UK said:
“By combining networks, Three UK and Vodafone UK will unlock £11 billion of investment that will help the UK close the 5G gap with leading European countries and realise its ambitions to be a front-runner in digital connectivity. 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.
Joining forces will also yield more immediate benefits. From Day One, our customers will enjoy faster, more reliable coverage over more of the country – and without paying a penny extra.
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.”
Ahmed Essam, CEO of Vodafone UK, said:
“We have formally submitted our Merger Notice to the CMA, having worked with them closely through the pre-notification process. We look forward to continuing the constructive conversations now that the formal process has begun.
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.
Our commitment to invest £11 billion will build capacity to meet the exponential growth in demand for data and accelerate the roll out of Advanced 5G across the UK, delivering benefits to consumers and businesses throughout the nation.”
We should point out that the CMA is solely focused on the competition side of things, which means they cannot consider other potential effects that the merger might have, such as on employment, access to personal data or any national security concerns. The latter would be a matter for the UK government via the National Security and Investment Act, but so far we’ve seen no solid indications of a probe being launch into that.
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The CMA is now inviting views by 9th February 2024 on how the merger could affect competition, and thus the statutory deadline for this investigation is Friday 22nd March 2024. If the CMA finds the merger could lead to a substantial lessening of competition, then it can refer it for a more in-depth Phase 2 merger investigation. Phase 2 investigations last between 24 and 32 weeks and are led by an independent panel of experts.
UPDATE 3:57pm
We’ve had a comment from Unite, which is calling on the CMA to block the merger and has previously warned that the deal could lead to higher prices, over a thousand job cuts, and no increase in investment.
Sarah Carpenter, Executive Head of Operations at Unite, said:
“The merger between Three and Vodafone must ring alarm bells for competition authorities. We’ve seen too often how these mega-mergers promise the earth but deliver little more than job cuts and price hikes, all for the sake of corporate profits. The CMA has a clear responsibility to block this deal.”
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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This is a disastrous proposal. EE,Vodafone and O2 all copy one another, whereas Three mobile sets out to be different and innovative. Three tends to offer the things the others refuse to offer.
Well, there’s a difference, unless you get 5G, Three is terrible in terms of data speed and re-tries on loading webpages
I’m not so sure I agree.
You describe Orange “back in the day”. Three seem to be pretty much the same as everyone else. Tariffs are similar, they were very late to the eSIM party, customer service is questionable at best.
Orange still seems to have retained some level of innovation in continental Europe (Orange Flex in Poland is an absolutely superb product). The mobile network picture in the UK seems rather stale.
I tried Three 5g hub.
It along with the customer service was absolutely shocking.
I’ve been with Vodafone 500 for 3 months and it’s been very good.
I really don’t want the merger, which is about shareholders and executives getting big paydays.
Vodafone 500 and Three 5G Home Hub are not comparable. Three’s Hub works over the mobile network which will be easily affected by things like objects, weather etc.
Vodafone 500 is a fibre product which does not suffer from the same problems.
I have a Three 5G Home Hub which gets average speeds of 300Mbps and around 26ms ping. Unlimited data for £20.
Fibre is better, but you can’t knock Three’s service and speed for the price. It depends what you want it for. If you’re a serious gamer, I would avoid it, but for general internet watching Netflix, YouTube etc, it’s no problem.
Three acquired loads of spectrum.
Three undercut pricing of competitors partly through pretty much everything being offshored.
This isn’t innovative.
Three hasn’t got the backhaul to get close to making the most of the spectrum it owns.
It may sound odd but losing the smallest network Three would be worse than a merger between O2 and Vodafone. Once you take the smallest network away that is seen to challenge the rest especially on price, the remaining 3 larger players increase there prices and I’ve always said that the two larger networks would be better merging. Liberty Global already own 5% of Vodafone and they own 50% of O2. A merger between Virgin Media,O2 and Vodafone would actually have less impact on competition and pricing than a simple Three Vodafone tie up. In fact a merger between Vodafone,O2 and Virgin Media would actually drive prices down for EE and Three as BT would be keen to want to keep up and the only way to do that would be to drop prices.
Any merger is likely to have a negative impact on employment and there would be a lot of redundancies. Liberty Global is infamous for shifting jobs to India,South Africa and Philippines.
I refuse to deal with companies that use foreign call centres and non-existent customer service and BT/EE’s decision to use only UK based call centres is what draws me to them.
Three adds very little value to the UK and Vodafone has lost its way with customer care. Come to think of it Vodafone has fallen behind everywhere, I cannot think of a single country they operate in where they are market leaders. I know in Spain Vodafone is bottom of the pile, they are not even second, I know Telefonica goes out their way to destroy competition but 3rd place in the UK and Germany is embarrassing for Vodafone.
Remember when t-mobile and orange merged. Now EE is the most expensive network.
We cannot allow networks to drop from 4 to 3 mno providers. Less competition on wholesale and they might not have plans now but things change. Just like when Kraft said “we have no plans to sell the Cadbury factory” a few months later they moved production to Poland.
Look what happened when Virgin moved from Voda/EE to o2 the network has slowed down massively.
They will simply cherry pick the best transmitters and turn off the other ones. Didn’t Orange in Northern Ireland get switched off and everyone used T-Mobile transmitters. Yes 4g and 5g has now been released and some new transmitters might have been put in place. This needs to get rejected. Any company that doesn’t own a network can buy three but not Vodafone. Maybe Sky should buy three to put Sky Mobile on. But they have shown no interest.
‘Look what happened when Virgin moved from Voda/EE to o2 the network has slowed down massively.’
They merged with O2 so wanted to move their MVNO from competitor networks to their own MNO. They were a fixed line cable company and merged with a mobile company with zero loss of competition in the mobile space confirmed multiple times. What does this have to do with anything?
‘Didn’t Orange in Northern Ireland get switched off and everyone used T-Mobile transmitters.’
No.
Cherrypicking transmitters will be a significant issue in some areas for coverage, especially mobile data coverage and wireless broadband. I would like to hope if the merge is permitted than there are specific conditions applied about not degrading coverage/data speeds.
Specific case in point: Holt Norfolk. 2 masts in the town–one Voda/O2, the other Three/EE. The Three/EE mast is effectively taller as it is on a small hill; Voda/O2 is in a small dip slightly closer to town centre. Therefore Three/EE provides superior coverage for the town (less obstructed line of sight to the mast from more of the town)–and Three is currently the only 5G operator in town. Next nearest set of masts for networks are some distance away and no 5G service yet so the “town” masts are critical for coverage.
The broadband alternatives for most of the town are Openreach FTTC (and Openreach recently screwed up my line and failed to repair, so switched to Three 5G); a little bit of Openreach FTTP in some new builds, with a future promise of FTTP from “up” in some parts of the town i.e. VirginO2 via their “next” business unit.
EE is a premium brand and service and the high prices reflect the service it offers, UK based customer contact centres and not being forced to use a rubbish app like My 3.
People would leave if they were not happy. It was BT who insisted on making EE a premium brand.
It’s not just about consumers. It’s about Virtual networks. EE and O2 have the most Virtual networks using there network because they offer the best deal and this means they are not as expensive as you think.
The Orange network was switched off in Northern Ireland and this decision was reversed as it caused problems.
The reason for the T-Mobile and Orange merger were because of the 2008 crash, they wanted to exit the UK market but they wouldn’t be able to find a buyer and instead merged. I believe BT,Orange and Deutsche Telekom actually planned the merger and EE buyout long before it happened. BT was keen to get back into mass mobile operations and was seen as the odd one out of Europe for not having its own mobile network.
Losing the smallest network Three will definitely drive up prices not just for consumers but for Virtual networks too.
Did you know Liberty Global owns 5% of the entire Vodafone Group whilst owning 50% of Virgin Media O2? So they actually have interests in both Vodafone and O2 in the UK.
A merger between Vodafone,Virgin Media and O2 would be mega merger but it would have the least impact on prices and competition. It would actually drive down prices as EE and Hutchison would drastically knock prices down and not just for direct consumers but for Virtual networks and business customers too!
A Vodafone/O2/Virgin Media merger would actually offer what Vodafone and Three are promising now but would be able to do that in a shorter time frame.
The Vodafone and Three merger does not include Vodafone’s fixed line assets but may include Vodafone Home broadband. Three does not have any fixed line assets in the UK.
In Austria Hutchison acquired Tele2 fixed line assets and the Orange mobile network from France Telecom and it was all rebranded as Drei.
It is not a budget network in Austria, its now more expensive
This time it’ll be different.. pinky swear, no fingers crossed behind back lol
I swear i’ll never understand mergers in the UK.
Virgin media wants to swallow the entire cable market, that’s fine.
One mobile company wants to take over another: lack of competition, banned.
A different mobile company wants to take over a different mobile company: this is fine, it will actually lead to MORE competition (somehow).
Microsoft wants to buy activision: nope banned.
Vodafone wants to reduce the number of operators in the UK: this is fine.
The difference between this and virgin taking the whole cable market was you could never choose a different cable provider
A town or city had 1 provider, so no competition.
We all know this is going to get the green light.
This should be stopped as we need 4 networks for adequate reliability and competition
Just moved from BT(EE) to Smarty(Three) – so far, so good. No issues, smooth switching process, and less than half the price for the same service.
Wait until you venture out of any urban area.
Three are only any good in areas that they have cherry picked for investment and their 5G is only available in those areas, outside those areas you be lucky to get 3Mbps!
Clearly profoundly relevant to the article. Thanks for posting and congratulations on a perfectly normal migration between MVNOs as happens many times each day.
Wait till you need help. Or wait till they blacklist your phone by accident. Some tool at Three blacklisted my phone by accident, someone had lost their phone and somehow they ended up blacklisting my IMEI they were a nightmare to deal with.
One thing I must say is that the network coverage is brilliant nowadays. The days of poor network coverage on Three are of the past. The 5G is comparable to EE.
It’s just they employ idiots to operate customer service, you know the most important function of a business.
Just say NO to merger!
NO, NO, NO, NO, NOOOOO! (Have 5 no’s!)
Thick envelopes in exchanging hands coming up then 🙂
Remember to, on a different subject, that OfCom thinks the Post Office is giving want consumers want by reducing the 6 day service to a 3 day service for higher prices then before it was sold off. Just an indication of this country and the BS flying around. Not the facts letters have reduced because nobody has any faith in sending anything and it get there or get there on time as a big cause of reduction (and not the sole cause).
Going back to the UK Markets, I’m sure it will be green lighted and we will all be told a story of how wonderful this is and how we will all benefit. Followed upon take over by cheaper 3 tariffs ending, people being forced to a so called “equivalent” tariff (more expensive, less benefits) and so on……
totally agree. The national security concerns over this should scupper it in its tracks alone. The very fact the CMA is doing this means it’s been greenlit already. Them envelopes must be very heavy.
The Post Office only opening 3 days a week? That may close completely once all the Horizon compensation has been paid!
Ofcom have paved the way for the Royal Mail to possibly only deliver 3 times a week, but since this forum is about the internet, just end an e-card instead……..
You’ll have to forgive me for being skeptical reading comments on 3 day service from someone that doesn’t understand the different between the Post Office and Royal Mail.
If you don’t understand it don’t regurgitate it.
The whole argument over national security baffles me. CK Hutchison already have a whole network to play with. If there was anything nefarious, they’d have a much better chance of hiding it with the network they currently fully own, than in a 49% joint venture with Vodafone. And if there was that much to gain from the data available, then they’d already be doing it, and the Chinese government would be pumping money (via the back door) into Three. Not saying it doesn’t happen / isn’t happening, but to block on national security grounds is like putting a hat on a hat.
Going to be an interesting merger.
Three can’t sustain their network build on cheap plans.
Vodafone can’t generate more than a few percent of investment for its network based off expensive plans.
The amusing thing is, if prices do go up, it’ll only benefit EE and o2. They have much higher returns to put back into there network which will be increased further by getting rid of the race to the bottom provider.
Pointless. Just need to get on with it so we can have probably invested, consolidated 5G networks instead of this patchwork half-arsed nonsense we have at the minute.
Every time a new G was launched, it was always patchwork by all operators. 3G, 4G and now 5G. It does take time and budgets hence why patchwork when launched for some years. Just because a company merges does not mean it suddenly has endless budget. There are normally big integration costs and transformation programmes of the organisations into one first. Then customer side integration changes once network side also sorted.
In rural areas with lots of partial not-spots this will be a game changer, we effectively only have two networks today.
O2 and Vodafone share most sites with identical coverage. Same with 3 and EE.
The ability to use both sets of cell sites will be a major advantage, I’ve been with O2 for 20+ years but will be leaving as soon as this goes live, I think the merged business will be a huge winner in rural areas just because of the improved coverage.
Name 5 mergers which have benefitted the customer?
T-Mobile Orange into EE? (Not EE into BT?)
Name any…….in any industry ever. They NEVER benefit anyone but the shareholders and board members.
@ – how did Tmobile & Orange merger benefit customers? I was on Orange at the time and after merger the prices went up.
We should have a mobile price cap set by the goverment because that has worked out so well with the energy market.
You mean a “price cap” which ends up being the price they’re allowed to charge?
If you don’t like unlimited anything or allowances and want to pay for every call, text and byte of data following that model would be a great idea.
That is why EE bestest network in the UK fastest 4g+ over 400 mbps Carrier arrgrogation on the masts.
No drop calls ect.
Yes there are expensive but you get what you pay for on EE worth it imo.
Three are crap on 4g
So are Vodafone and 02.
When it comes to 5g yes three is the best choice only if its in your postcode where you live ect.If not poor 4g performance download speeds slow.
I have EE as backup esim and every time I go inside of the building there is No Signal message, but Vodafone just continues to work… so it maybe fast but I still think not having 900mhz is an issue inside of the buildings.
Three are not crap on 4G. It depends where you live. I get excellent 4G (data & calls) on Three and for this reason I havent even bothered to upgrade to a 5G capable handset.
Fully agree, Three along with Vodafone and O2 are heavily under invested in three nearby towns with sluggish speeds in the town centres compared to EE.
Around here, EE really is the only real choice.
Less competition for consumers and any potential MVNO is likel6, in my opinion likely to drive up prices. I have never personally used Vodafone but I have used Three and their off shore customer service was awful. Thankfully I didn’t need to talk to them too often.
I’m currently with EE, have been since 2015 and have been mostly happy with their service. I’m happy to pay slightly more for a more reliable service, especially if it supports employment in the UK.
Other companies are using different off shore call centres. Three should spread out their call centres and use call centres in Philippines and Egypt too.
What will happen if CMA says no? will Three most likely sell their network to an interested buyer?