Vodafone-Three Merger: CMA Raises Concerns That Could Get the Deal Blocked

• The U.K. Competition and Markets Authority (CMA) is concerned about the Vodafone-Three merger and is debating whether it should be approved.
• Its major concern is that this deal will increase the end prices for customers and reduce competition in the industry.
• Vodafone and Three believe that this partnership will give the UK's telecommunication sector a much-needed boost.

The latest merger between Vodafone and the Three UK mobile network has raised concerns among UK authorities.

On Friday, the U.K. Competition and Markets Authority (CMA) said that they are worried that this deal will lead to price increases for tens of millions of customers. Some users might also face reduced services.

It will also reduce competition in the market - right now there are 4 major telecommunications network players but after the merger, there will only be 3. Low competition means no competitive deals for Mobile Virtual Network Operators (MVNOs) which in turn means no competitive prices for customers.

The only thing that's still going in favor of the merger is that the CMA agrees with the two companies on the fact that this deal could improve the quality of mobile networks and bring forward the deployment of next-generation 5G networks and services."

However, it also added that once the deal is approved, there won't be any incentive for the companies to follow through with their promise.

What Does Vodafone & Three Have to Say About This?

Both Vodafone and Three disagree with the argument that this merger will increase prices for customers. It maintains that the deal will not affect their pricing strategy and it will increase competition among the MVNOs.

Contrary to the CMA's belief that there are only 4 main players in the industry, they believe there are hundreds of players offering way more benefits. So there'll be no competition deficiency.

Prior to this, the companies also promised that they would invest 11 billion ($14.46 billion) into U.K. telecommunications infrastructure.

Unlike other developed countries, the UK's telecommunication industry is lagging behind and this investment will help in enhancing it by pushing 5G networks and broader coverage to every town and city in the country.

So What Will Happen Now?

The CMA has not yet blocked the deal, so there's still hope. For now, it will go through its provisional findings and look for solutions to its concerns. Here are some possible remedies:

• The CMA could ask the companies to sell off part of their businesses, but this is quite unlikely to happen.
• The CMA may also suggest a partial divestiture" involving specific mobile network assets to increase the competitive capability of an existing MVPO or to allow a new provider to enter the market as a mobile network operator. But again, it's unlikely that either of the companies will agree to this.
• The possible remedy would be imposing a legal agreement on the companies that'll ensure that they follow through with their promise even after the merger is done. Vodafone has said it has no problem with a legal binding.
• The agency also made some behavioral remedy suggestions such as imposing time-limited protections for its retail customers so that the prices are not too affected during the initial phase of integration.

About the Merger

The Vodafone-Three deal was announced last year. This $19 billion merger was supposed to give Vodafone a 51% controlling stake, leaving CK Hutchison (owner of Three) with a minority stake.

However, in January this year, the CMA started a probe against this deal. After the phase 1" investigations ended, a full-depth investigation was launched in June, the results of which were revealed during this latest press release.

The CMA will release its final verdict by 7th December.

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