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CMA launches investigation into Vodafone-Three merger

 (Yui Mok/PA) (PA Wire)
(Yui Mok/PA) (PA Wire)

The UK competition regular has begun a formal investigation into the blockbuster merger between telecoms giants Vodafone and Three.

The Competition and Markets Authority said its review is designed to identify whether the deal may lead to a ‘substantial lessening of competition’ and – if so – whether a more in-depth investigation is required.

Sarah Cardell, CMA CEO, 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."

In June last year Vodafone and Three have unveiled a deal to merge their UK businesses, creating a £15 billion behemoth that will be the country’s biggest mobile network operator.

But the deal could still be scuppered by regulators, after a previous merger between Three and O2 was blocked by the CMA.

The merger comes as mobile operators work to roll out 5G across the nation. The new business said it will invest £11 billion over the next five years to create a new 5G network.

Vodafone and Three’s parent company CK Hutchison Group Telecom Holdings will create a new entity, in which Vodafone will hold a 51% stake and CK Hutchison 49%.

Vodafone claimed that the merger could be worth as much as £5 billion per year in “economic benefit” by 2030, as it will allow the UK’s 5G network to get up and running more quickly.

If it receives regulatory approval, the deal should close before the end of 2024. But telecoms analyst Paolo Pescatore of PP Foresight warned that competition approval would not be guaranteed. In 2016, the Competition and Markets Authority blocked a takeover of O2 by Three over concerns about higher prices.

“This will be a hard sale given that both companies have been outperforming the market for the last year or so,” he said. “Let’s see if the authorities have a change of heart. Both parties need to demonstrate that this is genuinely in the interest of UK plc, the economy, and consumers for it to have a chance of getting over the line.”

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."

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."