British regulator approves $19.5 billion Vodafone-Three merger with conditions

The UK’s Competition and Markets Authority (CMA) has indicated that Vodafone's £15 billion ($19.5 billion) merger with Three could proceed, provided the companies agree to a series of remedies aimed at alleviating competition concerns, according to a detailed report by CNBC.

In a statement issued on Tuesday, the CMA outlined several conditions that Vodafone and Three must meet for the deal to gain final approval by December 7, the CNBC report explained further.

Details of the merger

The merger, which was first announced in June 2023, would create one of the UK’s largest telecom providers, combining Vodafone’s mobile network with Hong Kong-based CK Hutchison’s Three. Together, the companies would challenge the dominance of rival operators EE and O2, but the deal has sparked concerns regarding its potential impact on pricing and competition.

The CMA’s provisional approval is contingent on Vodafone and Three committing to substantial investments in UK telecom infrastructure and adopting short-term protections for customers and mobile virtual network operators (MVNOs).

Specifically, the two firms must pledge to invest £11 billion ($14.46 billion) into network upgrades over the next eight years, a move that Vodafone argues will help close the UK’s digital infrastructure gap.

Additionally, they must ensure that existing mobile tariffs and data plans remain unchanged for at least three years, ensuring stable prices for both current and future customers. This will help in keeping competition concerns in check.

Further, in a bid to preserve competition in the wholesale market, the merger would require Vodafone and Three to offer fair pricing and contract terms to MVNOs, which rely on third-party infrastructure for their services. The companies would also be required to provide regular updates to the telecom regulator, Ofcom, and the CMA on their progress.

Merger to be pro-competition for the UK mobile sector

Despite the CMA's preliminary concerns that the merger could lead to higher prices for consumers and reduce competition, the regulator believes that these remedies, along with protections for smaller providers, would address the risks while preserving the benefits of consolidation. Stuart McIntosh, who leads the CMA’s inquiry, noted that the merger could ultimately be "pro-competitive" for the UK mobile sector.

Vodafone has welcomed the CMA’s proposed framework, with a spokesperson telling CNBC that it provides a “path to final clearance” and that the merger will drive “significant benefits” for businesses and consumers, including enhanced 5G coverage in schools and hospitals across the country.

However, some industry players remain opposed to the deal. BT, the UK’s largest telecom provider, and MVNOs such as Sky Mobile, have warned that the merger could reduce competition and lead to higher prices. Kester Mann, director at CCS Insight, described the CMA’s announcement as a “big step forward” but predicted that the deal’s opponents would continue to lobby against it ahead of the final decision.

If approved, the merger would reduce the UK’s mobile operators from four to three, with Vodafone owning 51 per cent of the combined business and CK Hutchison retaining the remaining stake.