CMA offers potential solution to Vodafone and Three’s merger issues

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CMA offers potential solution to Vodafone and Three’s merger issues

Just weeks after the ***’s

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(CMA) warned that the proposed merger of mobile network operators Vodafone and Three would likely lead to higher prices and reduced service, it has now offered the telcos a pathway that could address competition concerns through network investment and customer protections.

Specifically, a Remedies working paper has provisionally found that a multibillion-pound commitment to upgrade the merged company’s network across the ***, including the roll-out of 5G, combined with short-term customer protections, could solve competition concerns identified in September 2024 and allow the merger to go ahead. 

Vodafone and Three first announced plans to merge in June 2023, a move that was seen as a response to BT’s 2016 purchase of EE, and the 2021 merger of ******* Media and O2 to form VMO2.

The merged company would have 27 million mobile subscribers in the ***. Three *** and Vodafone justified the combination by saying it would boost the roll-out of 5G infrastructure and allow greater scale to compete with the larger, converged telecoms and mobile players in BT/EE and VMO2.

The CMA kicked off an investigation into the merger in October 2023, and in its latest progress update said that “tens of millions” of mobile customers could see the cost of their mobile packages go up or services such as data allowances reduced.

While it acknowledged that the merger could improve the quality of mobile networks and bring forward the deployment of next-generation 5G networks and services, the CMA added that it considers these claims to be “overstated”, and that the merged entity would “not necessarily have the incentive to follow through on its proposed investment programme”.

The CMA also found that the wholesale market where virtual operators – such as Sky Mobile, Tesco Mobile, Lebara, Lyca Mobile and iD Mobile – resell airtime from the four network operators could see worse deals on offer through the reduction in competition from four to three suppliers.

At the same time, the CMA also consulted on ways to address its concerns – known as remedies. The Remedies working paper sought views on the effectiveness of a proposed remedy package, and has provisionally found that a legally binding commitment to undertake the network integration and investment programme proposed by Vodafone and Three would significantly improve the quality of the merged company’s mobile network, boosting competition between mobile network operators in the long term and benefiting millions of people who rely on mobile services.

That said, the CMA also found that short-term protections would be needed to ensure that retail consumers and mobile virtual network operators can continue to secure good deals during the initial years of network integration and investment roll-out. 

The remedies proposed today would require Vodafone and Three to fulfil three main actions. First, they would need to deliver their ****** network plan, which sets out the network upgrade and improvements they will make through significant levels of investment over the next eight years across the ***. This would be a legal obligation overseen by both *** telecoms regulator

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and the CMA.

Second, they would have to commit to retaining certain existing mobile tariffs and data plans for at least three years, an act the CMA said would protect 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. Last, they would need to commit to pre-agreed prices and contract terms to ensure mobile virtual network operators can obtain competitive wholesale deals.

“We believe this deal has the potential to be pro-competitive for the *** mobile sector if our concerns are addressed,” said Stuart McIntosh, chair of the CMA inquiry group leading the investigation.

“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 CMA stressed that its announcement was provisional, with a final decision due before its 7 December statutory deadline.

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