Vodafone and Three merger will cause price rises for millions, BT warns

vodafone logo pictured in mwc 2024 tradeshow floor

Vodafone has proposed a £15 billion merger with mobile network Three, which uses its 5G network to offer home broadband connections

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Aaron Brown

By Aaron Brown


Published: 25/06/2024

- 05:01

Submission from rival broadband provider was filed with the Competition and Markets Authority

The £15 billion merger between Vodafone and Three could increase prices for the 85 million mobile phone customers in the UK, rival telecom firm BT has warned. It also cautioned about "poorer network quality and reduced incentives to invest."

The explosive intervention was made in a written report filed with the UK Competition and Markets Authority (CMA), which is in the process of investigating the proposed merger between Three and Vodafone. It's worth noting that BT, which competes directly with Three and Vodafone, received approval from the CMA to acquire EE for £12.5 billion in January 2016.


vodafone wifi router pictured on a red cabinet

Vodafone offers pay monthly smartphone contracts, SIM-only, and broadband packages powered by BT-owned Openreach infrastructure, with speeds topping 900Mbps

VODAFONE PRESS OFFICE

Vodafone confirmed plans to merge with Three last summer. The final structure would see Vodafone own 51% of the combined business, while CK Hutchison — the Hong Kong-based parent company of Three UK — owns 49%.

At the time, Vodafone Chief Executive Margherita Della Valle described the merger as "great for customers, great for the country, and great for competition." As part of the deal, the telecom proposed a £11 billion investment to upgrade 5G infrastructure to improve mobile coverage nationwide.

After its initial investigation into the £15bn merger, the Competition and Markets Authority flagged concerns about the deal, "which combines 2 of the 4 mobile network operators in the UK", suggesting that it could "lead to mobile customers facing higher prices and reduced quality."

Three is “generally the cheapest” of the main mobile networks in the UK, with the CMA concerned that combining its business with Vodafone would "reduce rivalry between mobile operators to win new customers“, causing prices to rise.

BT has echoed these concerns in its submission to the second phase investigation of the merger by the CMA. BT stated that it agreed with the CMA’s initial conclusion that the Vodafone-Three merger would result in less investment.

The newly combined company would own a share of capacity and spectrum "unprecedented in the UK and Western European mobile markets," it cautioned. Together, Three and Vodafone would have roughly 61% of the UK mobile network capacity.

The UK Government conditionally approved the merger between Three and Vodafone on national security grounds, leaving the final decision with the CMA. The in-depth second stage investigation into the impact on customers will conclude on September 18, 2024. We expect to find out the final decision of the CMA on the deal in the following weeks.

Speaking to shareholders earlier this year, Vodafone exec Ms Della Valle said the firm remains in "deep conversations" with the Competition and Markets Authority, but she believes the process is "progressing well."

"The substance of the merger remains the one we have discussed in the past that should be really attractive to all stakeholders, not just our customers but also the broader UK base with more investment in our network that will trigger more investment for everyone," she added.

LATEST DEVELOPMENTS

Back in 2021, the Competition and Markets Authority cleared the £31 billion 50-50 merger between Virgin Media and O2. At the time of the announcement, Virgin Media had 5.3 million full-fibre broadband, pay-TV and mobile users, while O2 boasted 34 million mobile customers.

The brands said combining forces would create a "national champion" to challenge BT.

Since the merger, Virgin Media customers benefited from the O2 Priority loyalty scheme that was once exclusive to O2 mobile customers. It includes early access to gig and comedy tickets at O2 venues nationwide, discounts on meal deals and cinema tickets from popular chains. Virgin Media has also confirmed plans to allow broadband providers to use its infrastructure in a challenge to BT-owned Openreach, which supplies internet cables for Sky, EE, TalkTalk, Plusnet, and Vodafone.

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