Britain’s Competition and Markets Authority (CMA) has raised concerns over the proposed merger between Vodafone and Three UK, warning that the deal could result in higher prices or reduced services for millions of mobile users. The merger, which would combine the two telecom companies’ UK operations, is now under intense scrutiny as the CMA’s findings suggest it could harm competition in both retail and wholesale mobile markets.

The CMA stated that the merger could negatively affect customers, especially those who may struggle to afford mobile services, as well as Mobile Virtual Network Operators (MVNOs), which rely on existing infrastructure from major providers. The watchdog expressed concerns that fewer network operators would reduce competition, potentially limiting the ability of MVNOs to offer competitive pricing.

“The CMA has provisionally concluded that the merger would lead to a substantial lessening of competition in the UK – in both retail and wholesale mobile markets,” the regulator said in a statement.

While the CMA acknowledged that the merger could bring some benefits, such as improving mobile network quality and accelerating the rollout of 5G services, it cautioned that these advantages might be “overstated” and questioned whether the merged entity would follow through on its investment commitments.

Vodafone’s Response

Vodafone, which would hold a 51% controlling stake in the merged business, expressed disagreement with the CMA’s findings. The company emphasized that the merger would lead to an £11 billion investment in UK telecommunications infrastructure, which they argue would benefit consumers and improve the country’s digital capabilities, especially in 5G coverage.

Ahmed Essam, CEO of Vodafone’s European markets, said, “It delivers massive benefits for consumers, in towns, in cities, across the country.” He added that Vodafone is prepared to make its investment pledge legally binding and to address any of the CMA’s concerns.

Vodafone also disputed the CMA’s suggestion that the merger would lead to price increases, insisting that the UK mobile market already has a large number of providers offering competitive deals, and the merger would enhance rather than hinder competition.

Next Steps

The CMA is now consulting on its provisional findings and exploring potential remedies to address its concerns. These remedies could include binding commitments from Vodafone regarding infrastructure investments or measures to protect retail and wholesale customers.

If the concerns are not resolved, the CMA could block the merger. A final report is expected by December 7, 2024.

Essam remains optimistic, saying that Vodafone will work closely with the CMA in the coming months to address any issues and move forward with the merger.

This merger, if approved, would reduce the number of major telecommunications operators in the UK from four to three, a shift that has sparked significant debate over its potential impact on the market and consumers.

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