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Government Security Review Clears Vodafone and Three UK Merger

Friday, May 10th, 2024 (2:01 pm) - Score 3,960
Vodafone-and-Three-UK-Merger-Image

The Government has concluded its national security probe of the proposed mobile mega-merger between Vodafone and Three UK (CK Hutchison) – conducted under the National Security and Investment Act 2021 – and decided to approve the deal, albeit with some relatively minor caveats.

The issue of national security is one that has come up a few times before, with some MPs being particularly concerned about CKH’s perceived ties to China and any potential risks of access to sensitive national infrastructure or government contracts (here). The concerns are relevant because the government has been trying to avoid scenarios in which countries like China secure key positions in critical national infrastructure, such as telecoms.

NOTE: The merger, if approved, would see Vodafone retain a 51% slice of the business and CK Hutchison (Three UK) hold 49%. But there’s talk of diluting the Chinese share over time.

On the flip side, CKH may well point out that they already control some UK ports and power networks, although telecoms is generally considered to be a much more sensitive topic. All of this will have been considered under the recent review. But as widely expected, the government has now concluded this process and approved the merger.

However, the Secretary of State has required the parties to introduce several measures in order to “mitigate any risks to national security“, which we’ve summarised below.

Conditions of the Gov’s NSIA Approval

➤ Establish a National Security Committee within MergeCo to oversee sensitive work that Vodafone and Mergeco undertake which has an impact on or is in respect of the national security of the United Kingdom. This committee will be required to provide regular updates and information to HM Government;

➤ Establish a technical group within the National Security Committee which will monitor a specified list of topics relating to cyber, physical and personnel security. This committee will be required to provide regular updates and information to HM Government;

➤ Ensure that MergeCo’s network migration planning is subject to review by an external, Government-approved auditor; and

➤ Put in place specified arrangements for the governance of MergeCo.

The outcome is largely what we predicted it would be in February 2024 (here) and won’t pose any further impediment to the deal’s progress. But this will also have no impact on the main event – the ongoing investigation by the Competition and Markets Authority (CMA), which has already signalled significant competition concerns and questioned the data provided by both operators (here).

Getting the deal past the CMA seems likely to result in a requirement for significant concessions, which may or may not be palatable enough for the merger to proceed – assuming they don’t block it outright.

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Mark-Jackson
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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Comments
29 Responses
  1. Avatar photo Chris says:

    Truly surprised at this news, Vodafone is a carrier of national significance & importance plus going from 4 networks to 3 will seriously dent the competitive environment we currently enjoy.

    I’ve been on 3 or a mvno on 3 since ~2006 & this merger with vf will increase prices & decrease service which is already bad on 3 in London.

    The merger is all about releasing money into the markets which will come largely by increased prices plus decreased spend on infrastructure by all the remaining entities.

    1. Mark-Jackson Mark Jackson says:

      Yes, but that’s a matter for the CMA to resolve and, as above, it wasn’t something the security review is designed to cover. The CMA has yet to rule.

    2. Avatar photo Ad47uk says:

      I am not surprised, at all, and it will get passed by the CMA as well.

  2. Avatar photo Jordan says:

    why are they allowed to merge? just ban them… three is horrible whilst Vodafone is good. not a good merge.

    having 3 mobile providers will be making us the customers pay more monthly etc…

    1. Avatar photo Josh says:

      This is just the government clearing on National Security grounds.. The Competitions and Market Authority are to make a ruling still. Which is likely where this will fall apart.

    2. Avatar photo Munehaus says:

      The idea of the CMA review is supposed to ensure that the customer does not pay more and had a better service, by ensuring (as happened in Ireland) that regulations are put in place to enforce this. Of course this is the UK so if that happens or not may depend on if it happens before or after we get a sane functioning government.

    3. Avatar photo Me says:

      Ban Three? Ban the company that was behind Orange and responsible for a huge chunk of the UKs cellular market growth and infrastructure? How about no and think a little. Three are pretty good and indeed in areas with its poles of wonder 5G masts provide massively fast speeds. They just need to increase the coverage of their 5G. This merger will help them to do that.

  3. Avatar photo Who cares says:

    Can make a very good point on this one. I remember years ago when Orange and T-Mobile went together to form EE people complained back then about it they said the same thing when BT bought EE and o2 when together with Virgin Media they said the same thing It’s all scare mongering.

    1. Avatar photo Rich says:

      But what people said about the Orange/T-Mobile merger did actually happen, especially on costs! I was on T-Mobile at the time on a fairly standard priced tariff, that stayed for a few years then they decided that only EE tariffs would be available and they were significantly more expensive. They still are as the closest to my £10 SMARTY plan on EE is £28 with less data!

    2. Avatar photo Tech3475 says:

      Except only one of those mergers involved two providers of physical networks and IIRC with EE there were issues such as masts getting shut off as they consolidated the network resulting in at least some customers having a worse signal.

      In the case of Three and Vodafone, I fully expect a similar situation where they consolidate the network, although granted living down the road from a Three mast has the potential to improve my Vodafone signal, at home at least.

    3. Avatar photo TrueFibre says:

      That’s inflation food is getting your Energy bills is getting more expensive

  4. Avatar photo anonymous says:

    Anyone know if it was one brown envelope or a couple?

    Voda always been expensive and authoritative contractually, EE love expensive tariffs as BT. The only reason VM (who are with O2) does not up rates even more is because their cells over overloaded in most areas and know they can’t get away with it. The web site o2 tariffs direct from them are expensive, but via uswitch.com and similar sites are MUCH cheaper.

    At least MVNOs exist but how long before they have to increase rates because of more expensive partnering agreements?

    Appreciate just my opinion and there will be some fans and employees protecting any of the service providers, but that’s what a forum is and just how I feel….

    Pressure on CMA now due to this green lighting…..

    1. Avatar photo TrueFibre says:

      You need to negotiate a new deal. The new tariffs for the new customers are normally cheaper. but if your a loyal customer like me phone them up ask them for a cheaper price for the deal if they say we go can’t go any cheaper then say your going somewhere else then will have to give you cheaper deal to keep you that’s called data retention. It’s called being smart I do every time I finish my contract if you have 12 or 24 month contract if your contract is up then the prices go but renew your prices may go down. Like get Vodafone Full Fibre 910 the right price is £49 on Pro 2 I am getting for £41 a months

    2. Avatar photo TrueDeals says:

      I know what’s your all going to say this is about mobile’s but I was using broadband as example the same tricks works with mobile contacts.

  5. Avatar photo Anonymous says:

    Isn’t this a risk to security at all? I thought three has/had Chinese owners, or some interaction with China.

    1. Avatar photo Ivor says:

      three’s parent company is based in Hong Kong.

      CKH is a big owner of UK infrastructure. Alongside their current 100% ownership of Three, they also own utility companies (eg UK Power Networks), major ports, and Superdrug.

      It would have been difficult to suggest that they can’t own part of VodaThree on security grounds but can have full ownership in other critical national infrastructure.

    2. Avatar photo Who cares says:

      I don’t worry about security from china after the UK Government spy all they monitor your IP Address they monitor your bank accounts that’s they about income and tax returns and your savings. The UK Government has GCHQ

  6. Avatar photo Zakir Hussain says:

    I knew this will get approved this as the government has less money to deal with it’s a good news to them to approve it as it brings investment.

    Im happy about the news

    1. Avatar photo Anon says:

      This is just about security concerns of having a Chinese company (CK Hutchison Holdings), owner of Three, getting involved with Vodafone. Vodafone is a large company, has a few sensitive contracts, etc.

      The merger wasn’t approved and they’re were not looking at investment, effects on the communications market, etc. They’re just saying that the merger won’t be blocked because of national security reasons.

  7. Avatar photo BeeTee says:

    The security argument baffles me. CKH already own 100% of the Three network. So, if they were going to do anything nefarious, they could much more easily do it via a network that they fully own, rather than one they will only own 49% of alongside another player (Vodafone) who absolutely won’t tolerate anything going on. Not saying it’s not right to be concerned, do the due diligence etc., but to think they will do worse things being a smaller player in a bigger network, as opposed to being their own ‘big fish’ as they are now, is a bit bizarre. In the end, the likely store is that, either bit-by-bit or in one go, CKH is diluted out of the merged company. They clearly want out, but don’t want to shoulder a full loss, so they’re doing the groundwork for a phased exit.

    1. Avatar photo Anon says:

      – “CKH already own 100% of the Three network. So, if they were going to do anything nefarious, they could much more easily do it via a network that they fully own”

      My understanding is that Vodafone has contracts with the government and some sensitive companies. Three doesn’t have the same access as Vodafone does.

      From a national security point of view, data from nobodies trying to get a cheap unlimited data plan is less important than data from those working in the defence sector.

      But as you said, Vodafone will own 51% of the new company. I doubt CKH will be in control, so it’s normal for it to be approved.

  8. Avatar photo Anon says:

    Vodafone is buying Three.

    It’s important to keep this in mind because any concerns – if they exist – are about Three’s parent company, which is based in Hong Kong/China… so from a security point of view, Vodafone taking control over Three is good.

    CKH will own 49% of the new company, but it’s unlikely that they’ll be calling the shots. The new company is controlled by Vodafone.

  9. Avatar photo The_builder says:

    Say good bye to affordable phone contracts and welcome to expensive phone contracts.

    Three had been one carrier who was able to provide super competitive phone contracts. Have used three on and off since circa 2005.

    1. Avatar photo Bob The Builder says:

      Good riddance as Three’s unlimited plans simply aren’t feasible anymore, they need to invest more in their networks and offering unlimited plans for peanuts is NOT the way to do it.

      Bye Bye Three….

  10. Avatar photo Nadir says:

    I think the very poor networks from both Vodafone and three have held them back from being genuine threats against O2 and EE, that this merger is the only realistic way that could help them compete.

    1. Avatar photo ex-techie says:

      I’d agree with everything else except that Vodafone’s network has been vastly better across most of the country for reliability Vs Three. Three are cheaper but they oversell and underinvest in their network. It grinds to a halt in populated areas with a full signal. Vodafone will often just slow down and never be as fast overall. I think their network management strategy seems to be better, Frankly. It’s also DIRT cheap via talkmobile.

  11. Avatar photo Jason says:

    Mmm… Hate everything to do with Vodafone and actually quite happy with Three…
    Let’s hope they’ll actually have a better 4g and 5g network together – but don’t like the Vodafone network engineers and customer service practices take over

    1. Avatar photo Richard Walton says:

      I’m the complete opposite.
      Three are the worst company I’ve ever dealt with.

      I sincerely hope the merger direct go ahead. We need more competition

  12. Avatar photo Rik says:

    I have never used Vodafone but have been on Three in the past. Three have used their massive parental company to massively undercut the rest of the market by being a value option but over the years they’ve made some very unfriendly changes such as scrapping the One Plan and forcing people off it, to eventually bringing in RPI price changes despite previously saying they wouldn’t, and then there’s the heavy throttling they did on mobile usage when roaming.

    Having said that, their customer support wasn’t the best but they were cheap so you could almost forgive the offshore call centres etc. I’m now in a better position financially and find EE far superior in terms of network, customer service, and reliability.

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