Vodafone-Three merger would mean higher bills for ‘millions’ of Britons, watchdog warns

The merger of telecoms giants Vodafone and UK-based Three would lead to higher mobile phone bills for “millions of mobile customers”, the country’s competition watchdog has warned.

Vodafone and Three, which announced the £15bn deal last year, will be forced to address a number of issues highlighted by preliminary findings of an in-depth investigation by Britain’s Competition and Markets Authority.

On Friday, the CMA expressed concerns about rising bills and reduced levels of customer service, as well as a “substantial lessening of competition” by reducing the number of UK mobile network operators from four to three.

Vodafone UK and Three UK say the joint venture is vital to “fixing” the country’s “dysfunctional” mobile market, with the companies planning £11bn of investment in digital infrastructure.

The CMA said that while the deal “could improve the quality of mobile networks and speed up the rollout of next-generation 5G networks and services”, it had concerns about the investment package promised by the companies.

He added: “The CMA currently considers that these claims are exaggerated and that the merged company would not necessarily have the incentive to proceed with its proposed investment programme post-merger.”

In a joint statement, Three and Vodafone said they disagreed with the regulator’s assessment and promised that “prices will remain broadly the same or actually fall following the merger.”

The companies said the deal would improve market competition and investment, and bring “the best 5G technology to every community, school and hospital in the country.”

The UK currently ranks 22nd out of 25 European countries for 5G availability and speed, and has the slowest data speeds among the G7, according to Opensignal analysis cited by the companies.

But Vodafone and Three say the deal would deliver “better quality, greater capacity and greater coverage to more than 50 million mobile customers across the country”.

They said: “By all measures this merger is conducive to growth, customers, investment and competition. It can and should be approved by the CMA.”

Vodafone CEO Margherita Della Valle added: ‘Our merger is a catalyst for change.

‘It is time to take the handbrake off the country’s connectivity and build the world-class infrastructure that the country deserves.

‘We are offering a self-funded plan to boost economic growth and tackle the UK’s digital divide.’

The firms will now engage with the CMA to explore possible solutions to the CMA’s concerns ahead of its final decision on 7 December.

How could the deal affect the UK mobile market?

The need to invest in digital infrastructure in the UK is widely recognised.

Vodafone appeared to have been given the green light for the deal by ministers in the previous Conservative government after it was ordered to set up a national security committee to “oversee sensitive work” following the merger.

This came after a national security review sparked concerns over Three’s links to China, given that it is owned by Hong Kong group CK Hutchison.

Three UK chief executive Robert Finnegan said: “The UK mobile market, with four players, is dysfunctional and lacks quality competition, with two strong players and two weak players.”

He added: “This is reflected in the current state of the UK’s digital infrastructure, which everyone agrees is far below what the country needs and deserves.”

Matthew Howett, founder and chief executive of London-based analyst firm Assembly, said the CMA’s pricing concerns are “remediable,” noting the U.K. already has some of the lowest 5G costs among its peers.

He added: “A legally binding commitment to the £11bn of network investment promised, overseen by Ofcom, would be a win not just for consumers and network quality, but also for the new Labour government.

‘As the EU struggles with its own competitiveness relative to the US and Asia, attention must be paid to the UK’s position on the international stage.

‘(Former ECB President Mario) Draghi, in his report this week, highlighted the importance of infrastructure and connectivity in this story, and it is encouraging that the CMA has come to essentially the same conclusion.

‘The UK economy is failing to grow and the number one mission of the new government is to achieve sustained economic growth; success or failure depends on private sector investment.’