Competition regulators have warned that the proposed £15 billion merger of the UK businesses of mobile operators Vodafone and Three will lead to higher prices for millions of customers.
In its provisional findings today the Competition and Markets Authority (CMA) said the combination of two of the four network providers in the UK “may be expected to result in a substantial lessening of competition” that could result in their 27 million subscribers having to pay more.
The CMA also said it would mean that “virtual” network providers such as Tesco and Sky that do not operate their own 4G and 5G infrastructure would also suffer from reduced competition.
The merger would create the largest retail mobile operator by revenue in the UK and the second largest in terms of customers.
However, the CMA did not ban the merger outright and proposed a series of potential remedies that could reduce the impact on competition.
There will now be a further three months of consultation up to December.
In a statement Vodafone the Three said they “disagree with the CMA’s provisional findings that their merger raises competition concerns and could lead to price rises for customers.”
They added:” By all measures, the merger is pro-growth, pro-customer and pro-competition. It can, and should, be approved by the CMA…The combination of Vodafone and Three will fix the country’s dysfunctional mobile market characteristics, unleashing more competition and investment.
“Opensignal analysis sets out the current reality: the UK ranks 22nd out of 25 European countries for 5G availability and speed and has the slowest data speeds amongst the G7.”
Vodafone chief executive Margherita Della Valle said: “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.
“We do not agree with the CMA’s provisional finding that prices will increase. From the outset, we have been very clear that the merger will not affect our pricing strategy and that all social tariffs will continue to protect the vulnerable.”
Robert Finnegan, chief executive of Three UK, said: “We are determined to reassure the CMA in relation to their provisional concerns and work with them to secure the extensive benefits this merger brings for UK customers, businesses and wider society.”
Rocio Concha, director of policy and advocacy at consumer group Which? said: “We welcome the CMA’s clear findings. It is clear from those findings that the planned merger between Vodafone and Three could have a negative impact on millions of consumers.
.”The two companies are close competitors so the merger is likely to reduce competitive pressure in the market and lead to higher prices. “The regulator’s finding has set a high bar for the merger to proceed. It will be challenging for the regulator to design and enforce the necessary remedies to address the competition concerns.”
A Virgin Media O2 spokesperson said: “We believe that our new long-term agreement with Vodafone addresses many of the issues outlined by the CMA and that there’s a clear rationale for this consolidation.
“As well as bolstering elements of our existing partnership, the new agreement meansthat, post-merger, spectrum holdings will be more balanced which improves the functioning of the network sharing arrangement.
“ This ultimately ensures investment is maximised and network competition, coverage and performance is sustained and enhanced to the benefit of consumers and businesses across the country. We will continue our conversations with the CMA following its provisional findings.”