The U.K.’s antitrust regulator has greenlighted the longstanding planned merger between two of the country’s biggest telecommunication operators.
Vodafone and Three constitute two of the U.K.’s four infrastructure-owning mobile network operators (MNOs), alongside O2 and EE. As such, when the duo revealed plans to merge in a $19 billion transaction last June, it was always likely to attract scrutiny. The Competition and Markets Authority (CMA) kicked off its initial “phase 1” probe in January, before progressing things to a full in-depth investigation in June, after conducting a market analysis and collating industry feedback.
Then, in September, the CMA delivered its provisional findings, concluding that the merger could lead to higher prices for consumers, diminished services, and reduced investment in U.K. mobile networks. But it stopped short of blocking the deal, instead suggesting potential remedies to appease its concerns.
And this leads us to today, with the CMA finally approving the deal — with conditions. It said both companies must sign binding commitments to “invest billions” to launch a combined 5G network across the whole U.K. In the shorter term, the CMA also said that the new combined entity would have to cap “certain mobile tariffs” for three years, while mobile virtual network operators (MVNOs) would also continue to have pre-set contractual terms for the same period.
Vodafone Group CEO Margherita Della Valle said that the decision “creates a new force” in the U.K. telecom market.
“Consumers and businesses will enjoy wider coverage, faster speeds and better-quality connections across the UK, as we build the biggest and best network in our home market,” she said in a statement. “Today’s approval releases the handbrake on the UK’s telecoms industry, and the increased investment will power the UK to the forefront of European telecommunications.”
Behavioral changes
What’s notable here is that the agreed remedies are entirely behavioral, rather than requiring structural changes at the companies such as divesting certain business units or selling off infrastructure or IP — something that the CMA had previously suggested might be an option.
“The CMA’s decision is not a surprise — it has signalled for some time that it was receptive to approving the merger subject to appropriate concessions from the parties,” Alex Haffner, a competition partner at law firm Fladgate, said in a statement issued to TechCrunch. “Nevertheless, it is noteworthy in that it has permitted a ‘4-3’ merger in the mobile sector on the basis of purely behavioural remedies — over the past decade a multitude of ‘4-3’ mobile network mergers across Europe have been permitted only on the basis of significant structural remedies being conceded by the merging parties. In doing so, the CMA has displayed a degree of pragmatism, sensing that consumers will ultimately benefit more from competition between three well-resourced mobile operators in the UK market.”
Nonetheless, the agreed commitments will be overseen by the CMA and Ofcom, the U.K.’s regulatory and competition authority for the telecommunications industry.
“It’s crucial this merger doesn’t harm competition, which is why we’ve spent time considering how it could impact the telecoms market,” Stuart McIntosh, chair of the CMA’s inquiry committee, said in a statement. “Having carefully considered the evidence, as well as the extensive feedback we have received, we believe the merger is likely to boost competition in the U.K. mobile sector and should be allowed to proceed — but only if Vodafone and Three agree to implement our proposed measures.”
