Nic Serpell-Rand/Three

UK competition watchdog to probe Vodafone/Three merger

Three months after leading UK telcos announced plans to combine resources to better battle against with EE and Virgin Media O2, regulatory authority seeks early views on nature of proposed merger

After what the parties said would be the biggest shake-up in the UK mobile market for over a decade, allowing them to add what they regard as a much-needed alternative for the UK comms market, the merger of Three UK and Vodafone is now being investigated by the Competition and Markets Authority (CMA).

The potential merger was first announced in June 2023 and saw the operators’ parents Vodafone Group and CK Hutchison Group Telecom (CKHGT) enter into binding agreements to combine their UK telecoms assets in which Vodafone would own 51% of the combined entity, under the working title of MergeCo, and CKHGT would own 49%.

The prospective deal also contains call and put options, which if exercised would result in Vodafone acquiring CKHGT’s 49% shareholding. Vodafone UK CEO Ahmed Essam is set to become MergeCo CEO, and current Three UK chief financial officer (CFO) Darren Purkis will take the role of MergeCo CFO.

The CMA’s remit, by law, is to assess the potential impact of a merger on competition. It cannot consider other potential effects that a merger might have, for example, on employment or access to personal data.

Explaining its actions, the CMA said that it wanted to provide an early opportunity for interested third parties to comment on the impact that the merger could have on competition in the UK, in advance of launching a formal Phase 1 investigation once it has received the information it needs from the merging companies. This pre-notification period can take a number of months.

Once underway, a Phase 1 merger investigation must be completed within 40 working days. If the CMA finds the merger could lead to a substantial lessening of competition, then it can refer it for a more in-depth Phase 2 merger investigation. Phase 2 investigations last 24 weeks and are led by an independent panel of experts.

Further opportunities to submit views will be provided once the CMA begins its formal Phase 1 investigation. While it is for the CMA to investigate and decide whether this merger can proceed, it will consult Ofcom as the sectoral regulator which oversees mobile communications. National security concerns are outside the remit of the CMA’s remit and are a matter for the UK government, which may choose to intervene under the National Security and Investment Act if it finds concerns.

Commenting on its Vodafone/Three investigation, CMA chief executive Sarah Cardell said: “Millions of consumers and businesses in the UK rely on Vodafone’s and Three’s mobile networks to stay connected. We will be carefully considering how this deal may affect competition in the UK, which could affect the options and prices available to customers.

“We will also assess how it may affect incentives to invest in the quality of UK mobile networks. This is an opportunity for those with an interest in this merger to let us know their views before we launch a full investigation.”

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