CMA Give Provisional Green Light to Vodafone and Three UK Merger UPDATE2
The Competition and Markets Authority has today appeared to give a “provisional” approval to Vodafone and Three UK’s recently tabled commitments (here) under their proposed merger (here), which were intended to placate concerns that the deal could result in a “Significant Lessening of Competition” (SLC) in the mobile market. But it will require changes.
The merger itself, which would see Vodafone retain a 51% slice of the business and CK Hutchison (Three UK) hold 49%, has repeatedly 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. This would be a big help to the government’s own 5G targets.
However, the CMA’s investigation (here) found that reducing the number of primary mobile operators from 4 to 3 would result in a “Significant Lessening of Competition” (SLC), giving rise to various concerns at the retail and wholesale level. Some examples include the risk of higher prices for consumers, reduced quality, job losses (not a matter for the CMA), dominance of spectrum ownership, tedious confidentiality issues with conflicting network sharing agreements (e.g. EE and Three UK) and less competition at the virtual operator [MVNO] level.
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The CMA also doubted the benefits and credibility of an expanded 5G SA roll-out, while at the same time noting that both operators were in fact “viable and competitive businesses and that they would continue to invest in their networks absent the Merger“. Despite those concerns, the CMA left the door open for a potential agreement by recommending some possible remedies (here), which both Vodafone and Three UK felt they could accommodate.
The operators responded by setting out a series of headline commitments (here), which included making their network coverage targets enforceable by Ofcom (binding), divesting some radio spectrum bands to O2 (partly supported by Vodafone’s recent network sharing deal with VMO2 – here), providing a new reference offer to satisfy MVNO providers and limited protections for some retail prices.
The CMA’s Response
The big question mark was over how the CMA might react, particularly since the proposed commitments seemed, in some areas (e.g. retail pricing), to be a bit weak. The competition authority had previously indicated that Vodafone and Three UK might need to set a higher bar of commitments in order to secure the green light.
On the other hand, the challenge for Vodafone and Three UK is to find a balanced set of commitments that make sense, while avoiding a situation that could remove too many of the merger’s potential benefits (i.e. making it economically and competitively unviable).
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The CMA has today given their verdict on all this, which provisionally finds that a multi-billion-pound commitment to upgrade the merged company’s network across the UK, including the roll-out of 5G, combined with short-term customer protections “could solve competition concerns identified in September and allow the merger to go ahead.” But the CMA will require some stronger commitments from the operators.
The remedies proposed today would require Vodafone and Three to:
➤ Deliver their joint network plan – which sets out the network upgrade and improvements they will make through significant levels of investment over the next 8 years across the UK. This would be a legal obligation overseen by both Ofcom – the telecoms regulator – and the CMA.
➤ Commit to retain certain existing mobile tariffs and data plans for at least 3 years, protecting millions of current and future Vodafone / Three customers (including customers on their sub-brands) from short-term price rises in the early years of the network plan.
➤ Commit to pre-agreed prices and contract terms to ensure that Mobile Virtual Network Operators can obtain competitive wholesale deals.
The deadline for responses to the new Remedies Working Paper on all this is 5pm on Tuesday 12th November 2024. But rather annoyingly, the CMA hasn’t yet published this paper in public (it’s expected later today), so we can’t yet analyse the detail. However, on the surface, it appears as if the CMA’s requirements, such as on areas like consumer pricing, appear to go further than the more restrictive approach proposed by the operators.
Stuart McIntosh, Chair of the CMA Inquiry Group, said:
“We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.
Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.
A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”
The deadline for a final outcome is currently still 7th December 2024, although we suspect this proposal will be one that Vodafone and Three UK can accept (we’ll update with their formal response once it drops). However, many consumers will no doubt be concerned, particularly with respect to what might happen after the 3-year period of tariff protection expires (e.g. big price hikes).
Take note that the tariff protections are unlikely to extend to stopping the usual mid-contract price hikes that mobile operators tend to deploy each year, as these are normally an allowable change. But we’ll need more detail before being able to confirm.
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UPDATE 7:58am
The first comments are coming in and Vodafone seems happy.
A Vodafone spokesperson told ISPreview:
“Vodafone and Three will need to study the Working Paper in detail, however from what the CMA has communicated so far this morning, we believe it provides a path to final clearance. The merger will be a catalyst for positive change. It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.
The CMA’s final decision on the merger is due by 7 December, and we will continue to positively engage with them to resolve any outstanding matters.”
UPDATE 9am
We’ve had a full joint statement from Vodafone and Three UK.
Vodafone and Three’s Response
Vodafone and Three (“the Parties”) note the CMA’s announcement that it will publish a Remedies Working Paper, for a final round of consultation.
The Paper follows 18 months of extensive engagement between the CMA and the Parties, including the submission of detailed evidence, which highlights the pro-growth, pro-customer and pro-competitive benefits of the merger.
The Parties welcome the CMA’s recognition that the significant improvements in network quality delivered by their Joint Network Plan will, “boost competition between mobile network operators in the long term and benefit millions of people who rely on mobile services.”
The merger is a once-in-a-generation opportunity to transform the UK’s digital infrastructure – which lags significantly behind its European peers – and for more than 50 million UK customers to benefit from a vastly better mobile experience.
Vodafone and Three will need to study the Working Paper in detail. From what the CMA has communicated so far this morning, we believe it provides a path to final clearance.
An appropriate balance appears to have been struck by ensuring that the significant benefits of the merged company’s investments can be realised in full and at pace to the benefit of the country and its citizens, while addressing the CMA’s stated concerns. However, it is essential that balance is preserved through to the end of the process, reflecting that the Parties have offered extensive remedies, including by making their future network roll-out fully enforceable.
The merger will be a catalyst for positive change. It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country. The merger is also closely aligned with the Government’s mission to drive growth and to encourage more private investment in the UK. As the Government has recognised, high quality digital networks are pivotal to this*, as all countries’ future prosperity and technological advancement will be underpinned by world-class connectivity.
The CMA’s final decision on the merger is due on or before 7 December, and we will continue to positively engage with them to resolve any outstanding matters and secure approval.
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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Three/Vodafone will want that £11bn investment back. EE will invest more in their network to match Three/Vodafone’s 5G speeds and will want their investment back. With no competition from O2 the days of circa £10 SIMs are numbered.
And the outcome with be massively increased pricing for consumers. Top marks OFCOM for being a consumer champion!
“EE will invest more in their network to match”
ahahahahahaha
you’re funny
Why all the doom and gloom?? That’s not at all how competition between mobile operators work. If Vodafone and 3 and EE both stopped doing £10 deals what then stops O2 doing them or the virtual operators doing them? Nothing that’s what. I for one would be paying Vodafone and 3 less as I need a SIM for both networks as where I travel around I lose signal for one of them I need data for my business, so I would only need one SIM now, about time. Having 3 operators that own the infrastructure is not a bad thing for the consumers, it means less of the exactly same infrastructure in the same place, what means less e waste when it gets changed so less chips being used, less power being used for the same antenna just for a different operator what means more power available for the consumer what equals ever so slightly lower bills as all those transmitters added up what aren’t needed anymore require a lot of juice. There are quite a few countries that only have 3 main operators, the USA being one and it has some of the lowest bills on the planet and all the rest with the only 3 are the same have some of the lowest bills on earth. This country just wants to be negative all the time but there was no problem when BT and EE merged and made a juggernaut in the broadband and mobile space the same with virgin and O2. No one seems to care that BT and EE is the biggest opposition to this merger maybe because they haven’t been bothering to invest into their network at all and now realise they will have to play catch up and spend millions just like no one cares that EE is the worst at prices and bill increases and complaint handling but of course Vodafone and 3 will cause a mobile apocalypse. It won’t it will make companies like EE and BT and O2 and virgin get of their behinds and invest into their networks and customers so they can compete just like it should be. End of rant
It’s all about money I remember when Orange and T-Mobile merged 02 and Vodafone were complaining about prices and the same when 02 went with Virgin Media. Now that Vodafone and 3 UK are merging all the other networks are complaining
How will this work when Three share sites with EE and Vodafone share sites with o2?
Exactly what I want to know
Three/EE share towers.
O2/Vodafone share hardware.
This has been explained numerous times by now , they both have pledged to continue their deals. Vodafone just did a new one and expanded it with 02
I don’t understand why this merger has to happen For them to invest 11 billion into the infrastructure, Both of those companies could easily do that today without even touching the sides of their profits
However, I’m excited to see where this is going
But it would hit dividend pay outs, and impact the revenue for those at the top of the companies….hence merger. The consumer doesn’t matter in 2024, this travisty been allowed is a perfect example of this.
Furthermore; the above inflation annual price rises were supposed to fund investment.
It doesn’t make any logical sense to keep putting the exactly same infrastructure in the same place just for a different network, that £11 billion is not each, most would come from Vodafone and less from 3. So that total can now go a long way and expanded 5g into more rural areas and cities than it would do otherwise so the roll out is faster. But people like to always just go to, “fill up the share holder pockets” excuse, what I always find funny because if you have a private pension you are a shareholder in these companies lol. The more logical answer is it gets there roll out done quicker and cheaper what’s more effective and efficient and ironically that is better for the shareholders e.g. you and will get them more government funding if they hit targets on time or early
There is no doubt this will result in a reduction in competition and an increase in prices – even if not in a short term view that exists to placate regulators. It’s a net bad for consumers – and has been in any other country where this happened.
I’m expecting them to eventually try and de-duplicate their masts as well, so there’s potential for a reduction in service.
This happened before with T-Mobile/Orange, so it’s not without precedent.
Have no idea where you get your info from but it’s a load of bs lol. In countries where 3 main operators are in effect the country has some of the worlds lowest prices and quickest roll out of new infrastructure. You need to stop reading constant negative news
Jake, countries with 3 networks that have low prices have networks like Three or Free (or owned by them). There will be no Three or Free in the UK. The type of networks we’ll have are different from what a country like Ireland has.
The end of competitive mobile tariffs in 24 months, the period quoted as nothing would change.
Three dinosaurs left to battle out a plan to extract as much money as is possible for the years after, citing investment reasons. Meanwhile, the exchange of brown envelopes at the CMA has caused some leave to be booked so a luxury world wide cruise can be undertaken. Lets look at the facts; VMO2, EE/BT and Voda. All companies known to love ramping up prices.
Whenever they say its in public/consumer interest it’s the opposite. They take us for fools.
That’s because the vast majority are sheep who believe everything they are told.
Opinions are like bumholes.
Appreciate I’m just a sheep but ThreeUK has been cash flow negative a fair bit and made an operating loss in year to end of 2023. Operating so nothing to do with dividends. That with their offshore customer service and cutting back on costs.
Vodafone UK is about the worst performing unit of the entire company and Return on Capital Employed in the UK mobile sector generally is gack. Vodafone UK is being subsidised by India and others.
https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/financial-advisory/deloitte-uk-future-of-the-uk-mobile-value-chain-feb-2022.pdf
People go abroad and complain about how their data service is faster roaming than in the UK, data speeds are poor relative to much of Europe generally and prices here tend to be lower.
Slightly old but not significant changed since: https://www.statista.com/statistics/1123435/price-mobile-data-europe/
Three revenue per unit, as in per customer contract or PAYG, actually dropped in 2023 from 2022 while costs increased.
None of the MNOs are coining it at the moment, they need fixed line and own fibre networks to support them, and there’s about £25 billion that needs spending on network upgrades over the next years. Mobile data use is going up quite a bit faster than fixed line and costs a lot more to support.
On pricing isn’t that long ago unlimited data was rare and us sheep paid through the nose for maybe 5 GB a month. I would rather we have reliable and decent performance mobile networks than unreliable but really cheap with dodgy service, both mobile and customer, but mileage may vary. Three are going to have to get considerably more expensive either way.
Thank you, Witcher, for a such an insightful and cogent opinion post.
They don’t come often.
Not a surprise, the CMA is a total and complete waste of space, They say they are for the consumers., Total and complete BULL.
Only have to look at how they are handling supermarkets and loyalty cards,
Another regulator that fails to protect the consumer.
The reason that I got rid of fixed line internet and phone was because mobile offered better value for money, I just hope that things don’t change
OFCOM isn’t a regulator, its a quango who’s sole purpose is lining the pockets of its rich friends at the cost of the consumer.
Ofcom didn’t make the call here, Lugz.
James: value for money is great but if the company isn’t making any return it’ll stop investing. Reliability and performance will suffer. Both the CMA and Ofcom are there to strike a balance not to ensure our products are cheap. That needs nationalisation and I think our taxes have quite enough pressure on them without adding subsidising wireless so that it’s cheaper than fixed line and James Smith considers it good value.
Obviously this will not benefit the consumer overall and long term.
And obviously having enough money can buy you want you want, for example, a merger.
Why do these unelected champagne drinking (expensive) quangos exist?
They do not do their foundation reason for creation; to protect or enhance competition and prevent foul play/cartel/monopolies.
Any integrity with CMA is blown after this.
Both the CMA and OFCOM both needs disbanding after this shockingly bad decision……they are both totally unfit for purpose.
Who’d have thought it? Obviously has financial benefits for the 1% and not consumers.
I know it can come across as selfish, but for me where Vodafone signal is bad, Three is good and visa versa. I’m looking forward to the potential benefits.
How will from day one though users benefit from both signals? I’m sure that was mentioned as something being implemented at the start. Surely if it’s all turned on and accessible on both networks, it will cause issues.
Exactly. I live in a place where both are complete rubbish, so here’s hoping that a merger will bring better coverage and data speeds (and 5G) to consumers.
I don’t see that happening though, so as others have pointed out, this will probably result in the same garbage service (potentially getting worse) but with lesser competition and higher prices.
Something needs to change. But with mast-phobia rampant in this country, it’s not going to happen.
@Duncan: We can take a look at what happened when T-Mobile and Orange merged to form EE. They combined their networks to provide better coverage, partly by reallocating spectrum more efficiently across the combined network, whilst being able to cut out wasteful duplication by decommissioning redundant masts. They enabled national roaming so T-Mobile customers could automatically switch to better Orange signals and vice-versa.
I would expect Vodafone and Three to do something very similar if they merge.
My feeling is that three MNOs are the most we’d want right now, striking a balance between being able to make the necessary heavy investments into networks whilst being profitable in a competitive market. It seems to escape some people that profitability is essential and just having a lot of competition with resultant low margins makes no sense at all.
@roger we can take a look at what happened with TMobile & Orange merger.. I was with Orange at that time and after it became EE the prices shot up. The ‘investment’ around this town was never done. The dead spots are still dead to this day. I looked into it and no planning applications have been made anywhere near those dead spots. This isnt even a rural location, this is a 10 minute walk away from a busy town center BUT with this merger itll be different lol
In fairness, I think they were caught between a rock and a hard place. Either allow the market to reduce to three networks in a controlled way, or have a split between two giants and two minnows, or have it reduce to three players naturally. Damned if they do, either way.
In Italy when the mobile networks Wind and [Three’s cousin] Tre merged the European Commission required them to relinquish spectrum and infrastructure to be sold to a new market entrant.
The new entrant was provided with access to Wind Tre’s network for a minimum of 5 years [extendable to 10], enabling them to build their own new network whilst operational.
This resulted in the launch of a new fourth network Iliad, now Italy has Europe’s most competitive mobile market and excellent mobile infrastructure.
It’s a shame that OFCOM are not as competition and consumer minded as the EC.
You could describe the new network as a bit of a…. Trojan Horse… (I’ll get my coat.)
The spectrum should be done anyways to give every network equal amounts so that then none of them can moan about spectrum holdings.
I may be mistaken but I seem to remember something similar happening with Three in the early 2000s
I think they were sharing Orange’s infrastructure until they could deploy their own shiny-shiny 3G network.
@André: Yes, I recall that too now you’ve jogged my memory. Coincidentally Orange was once owned by Hutchison Whampoa Ltd [now CK Hutchison Holdings, the owner of Three UK], don’t believe it was when Three was launched though.
Good luck starting a new mobile network here.
Three has struggled non stop with planning applications for poles being rejected left, right and centre. Its no wonder they want to exit the UK market.
Hmmm, so the reason voda & 3 are merging because they dont have enough money to invest individually but together ape strong.
Then we have three networks, then a new fourth network will be able to cover the costs for a new network, all alone? when big boys voda & 3 couldnt?
Is there an example of a merger that has led to more competition? Especially in a market of four.
The CMA is as rotten as all the other public sector entities driving the economy into the ground.
Yes, Wind and [Three’s Italian cousin] Tre, see my comment above yours.
Yatta! Thank you for your comment above explaining the merger of Tre and Wind in Italy. That merger only led to a fourth operator Iliad to be formed. So at the end of the day the Italian market has gone from having 4 major operators to basically having 4 again (WindTre which have merged creating one, Vodafone, TIM and Iliad).
as long as it doesn’t affect competition, or drive up prices or affect my ability to switch between vodafone and three for the best prices/offers then it should be ok
Innovation is key to the UK building back better.
It is good news for consumers that regulars are not tying the hands of entrepreneurs looking to innovate around merge and expansive investment. This will bring a wider range of consumables that people can enjoy.
bye bye real IP address with no CGNAT
bye bye unlimited data for £10 a month
hello slow vodafone
I pay £9.98 for unlimited data with Lebara [a Vodafone MVNO], live in an area with mediocre 5G reception, yet still have a DL speed of 150-200 Mbps / UL 10-20 Mbps.
Very happy with the price/performance, using it for home broadband with a 5G router. Will hopefully continue to do so until a symmetrical FTTP provider is able to connect my property to their network.
Looks like it’s going to be approved. I can only hope that this transforms the UK’s mobile infrastructure greatly, but we need a few years to know for sure.
We’ve been limping behind other countries for years and our mobile infrastructure is diabolical: do you consider 1mbps with no upload on a mast in a city in 2024 to be enough?
I’m hoping this might improve my experience on O2 locally, but we can only wait. Could be porting one number over to Vodafone in the coming weeks anyways.
Could not have said it better, well said!
Incredible news, best possible outcome. Really looking forward to the improvements me get from this!
Lower prices, as the cost savings can be passed onto the end user/customer and better coverage should be a win for all £5 unlimited sim offers anyone?
Looks like defeat to me, 3 years will go by in 5 minutes. The fact they had to add that as a condition shows what the long term effects will be.
The merger is clearly to add shareholder value, so infrastructure spend per subscriber will be lower and I expect less competitive options after the 3 years are up.
‘Short-term customer protections’ After that short term..then its stiff the consumer good n proper.
Wont the so called ‘merged’ (AKA vodafone) network be heavily congested? because most of the Three sites will no longer operate as theyre too close to the vodafone sites.
Three was the competition.