Christmas has come early for Vodafone and Three in the UK with the Competition and Markets Authority (CMA) approving the merger of the two MNOs, creating the UK’s largest MNO and potentially giving 5G a much needed boost in the country.
Considered by the two companies to be a “once-in-a-generation opportunity to transform the UK’s digital infrastructure”, Vodafone and Three have committed to invest £11 billion to create one of Europe’s most advanced 5G networks. The new network will reach 99% of the population and benefit over 50 million customers1, through significantly better quality, greater reliability and enhanced capacity for handling ever-increasing data demand. This demand is set to accelerate further with more widespread adoption of new technology, such as AI.
The £11 billion network investment will require no public funding and, as highlighted by the CMA, will “boost competitionbetween the mobile network operators in the long term, benefiting millions of people who rely on mobile services”.
In September, an independent inquiry group set up by the CMA led an in-depth Phase 2 investigation of the merger and provisionally found it could lead to higher prices for customers and less advantageous terms for virtual network providers (which depend on networks like those provided by Vodafone and Three to supply their own retail customers).
Since publishing those findings, the group has explored how its concerns might be resolved and in November published a remedies working paper which included a range of potential remedy options. The group has since analysed responses to the working paper and closely engaged with respondents. The group has also sought further input from Ofcom, the communications regulator.
In its final decision, published today, the group has confirmed it is now satisfied that the proposed network commitment, supported by shorter term protections for both retail and wholesale customers, resolve its competition concerns.
The merger will therefore be allowed to proceed subject to the following legally binding commitments which require:
- Delivery of the joint network plan, which sets out the network upgrade, integration and improvements Vodafone and Three will make to their combined network across the UK over the next eight years. The group has concluded that by significantly improving the quality of the combined network, the full implementation of this plan would boost competition between the mobile network operators in the long term, benefiting millions of people who rely on mobile services.
- Capping selected mobile tariffs and data plans for 3 years, directly protecting large numbers of Vodafone / Three customers from short-term price rises in the early years of the network plan.
- Offering pre-set prices and contract terms for wholesale services (again for 3 years) to ensure that virtual network providers can obtain competitive terms and conditions as the network plan is rolled out.
The network commitment would be overseen by both Ofcom and the CMA, with the merged company also required to publish an annual report setting out its progress on the implementation of the network plan. The CMA would have responsibility for monitoring and enforcing the protections relating to consumer tariffs and wholesale terms.
Stuart McIntosh, chair of the independent inquiry group leading the investigation, says of today’s go ahead: “It’s crucial this merger doesn’t harm competition, which is why we’ve spent time considering how it could impact the telecoms market. 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 UK mobile sector and should be allowed to proceed – but only if Vodafone and Three agree to implement our proposed measures. Both Ofcom and the CMA would oversee the implementation of these legally binding commitments, which would help enhance the UK’s 5G capability whilst preserving effective competition in the sector.”
Margherita Della Valle, Group CEO at Vodafone, says: “Today’s decision creates a new force in the UK’s telecoms market and unlocks the investment needed to build the network infrastructure the country deserves. Consumers andbusinesses 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. 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.”
Canning Fok, Deputy Chairman of CK Hutchison and Chairman of CK Hutchison Group Telecom Holdings – owner of Three UK – adds: “We have been operating telecoms businesses in the UK for over three decades and Three UK forthe past two. We have invested in the people and the infrastructure, helping to bring the benefits of mobile connectivity to UK businesses and consumers. When Three and Vodafone are combined, CK Hutchison will fully support the mergedbusiness in implementing its network investment plan, the cornerstone of today’s approval by the CMA, transforming the UK’s digital infrastructure and ensuring customers across the country benefit from world-beating network quality.”
