Vodafone and Three UK merger likely to go ahead, says regulator

Deal could proceed if the companies stick to pledge to invest £11 billion in infrastructure

Vodafone said, in a joint statement with Three, that the merger would be a 'once-in-a-generation opportunity to transform the UK’s digital infrastructure'. Reuters

A £15 billion merger between UK mobile networks Vodafone and Three could get the go-ahead if the companies stick to their commitments to invest in the country’s infrastructure, the regulator said on Tuesday.

Britain's Competition and Markets Authority (CMA) said the deal could proceed if the remedies it recommends are implemented, including a legally binding commitment to invest in the roll-out of the 5G network, plus short-term customer protections.

The regulator said the pledge, which represents £11 billion of investment in the joint network, had “the potential to be pro-competitive for the UK mobile sector”. The provisional ruling marks a change of tone for the antitrust regulator, which had originally said the reduction of British networks from four to three could push up prices for customers.

But the new approach reflects the broader strategy set out by the Labour government, which wants regulators to approve deals and corporate plans if they boost investment in the country's infrastructure and public services.

The CMA also said the merger can proceed if the companies commit to short-term consumer protections including not increasing prices on some tariffs. “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed,” said Stuart McIntosh, chairman of the CMA's inquiry group.

Vodafone and Three said in response to the CMA that they now believe there is a “path to final clearance”. “The merger is a once-in-a-generation opportunity to transform the UK’s digital infrastructure – which lags significantly behind its European peers,” the pair's joint statement said.

The CMA is due to make a final decision on or before December 7 and the parties said they would engage with the regulator before then.

There are currently four mobile operators in the UK: Virgin Media-O2, EE, Vodafone, and Three, which is owned by Hong Kong-based CK Hutchison. Vodafone's chief executive, Margherita Della Valle, previously said a merger between her company and Three would be a “catalyst for change”.

Robert Finnegan, chief executive of Three, argued the UK market was “dysfunctional and lacks quality competition”, because of the existence of two large players – EE and Virgin Media O2 – and two small players – Vodafone and Three.