The planned £15bn merger between Vodafone and Three could lead to price increases for tens of millions of mobile customers, the Competition and Markets Authority (CMA) has warned.
The watchdog added that the deal, which was first announced last year, could also see customers get a reduced service such as smaller data packages in their contracts.
The CMA also said that it has “particular concerns” that higher bills or reduced services would negatively affect those customers least able to afford mobile services as well as those who might have to pay more for improvements in network quality “they do not value”.
Following an in-depth investigation, the organisation also provisionally found that the merger could negatively impact ‘wholesale’ telecoms customers such as Lyca Mobile, Sky Mobile and Lebara which rely on the existing network operators to provide their own mobile services.
The CMA said that the merger would reduce the number of network operators from four to three – making it more difficult for them to secure competitive terms, “restricting their ability to offer the best deals to retail customers”.
In response, Vodafone said the deal with Three “will fix the country’s dysfunctional mobile market characteristics, unleashing more competition and investment”.
In a statement issued to the London Stock Exchange, Vodafone added that the merger “will transform this current reality, bringing best-in-class 5G to every community, school and hospital in the country”.
Vodafone also vowed to continue to work with the CMA to “demonstrate the merged company will deliver in full on the committed network investment”.
Despite its concerns, the watchdog did say that by integrating the Vodafone and Three networks it could improve the quality of mobile networks and bring forward the deployment of next generation 5G networks and services.
However, CMA added that it “currently considers that these claims are overstated and that the merged firm would not necessarily have the incentive to follow through on its proposed investment programme after the merger”.
As a result, the CMA provisionally concluded that the merger would lead to a substantial lessening of competition in the UK – in both retail and wholesale mobile markets.
The CMA will now consult on its provisional findings while a final decision is expected by 7 December, 2024.
A ‘thorough, considered approach’ – CMA
Stuart McIntosh, chair of the inquiry group leading the investigation, said: “We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.
“We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments.
Vodafone merger with Three a ‘catalyst for change’
Margherita Della Valle, Vodafone’s chief executive, added: “Our merger is a catalyst for change. It’s time to take off the handbrake on the country’s connectivity and build the world-class infrastructure the country deserves.
“We are offering a self-funded plan to propel economic growth and address the UK’s digital divide.
“Great network connectivity is a critical enabler of so many elements of our daily life and is central to the future prospects of so many sectors.
“Businesses large and small are dependent on it and it enables new industries – like AI – to thrive. It facilitates a step change in productivity and care across the public sector, and it lies at the heart of every nation’s future prosperity.”