Saturday, October 5, 2024

Proposed merger between Vodaphone and Three could lead to price rises, fears CMA

The Competition and Markets Authority believes a merger of Vodaphone and Three would lead to UK price increases or service reductions for tens of millions of mobile customers.

The CMA 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.

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.”

The CMA has also provisionally found that the merger would negatively impact ‘wholesale’ telecoms customers – Mobile Virtual Network Operators such as Lyca Mobile, Sky Mobile and Lebara – which rely on the existing network operators to provide their own mobile services. The merger would reduce the number of network operators from four to three, making it more difficult for MVNOs to secure competitive terms, restricting their ability to offer the best deals to retail customers.

While identifying these concerns, the CMA has also found that the merger, by integrating the Vodafone and Three networks, could improve the quality of mobile networks and bring forward the deployment of next generation 5G networks and services, as claimed by Vodafone and Three. But the CMA 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 has 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. It will also consult on potential solutions to its competition concerns, including the options set out in its remedies notice (also published today). These include legally binding investment commitments overseen by the sector regulator, and measures to protect both retail customers and customers in the wholesale market. The CMA will retain the option to prohibit the merger should it conclude that other remedy options will not address its competition concerns effectively.

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