Michelle ThompsonThe CMA will analyze the impact of the proposed merger on competition for consumers and companies.
The UK competition authority has opened an investigation into Vodafone and Three’s proposed merger, which would create the UK’s largest mobile phone operator.
The Competition and Markets Authority (CMA) now has up to 40 days to review the transaction and determine whether it warrants a thorough competition inquiry.
The CMA’s chief executive, Sarah Cardell, stated: “This deal would bring together two of the major players in the UK telecommunications market, which is critical to millions of everyday customers, businesses, and the wider economy.”
In a second step this week, the government stated that a stake in Vodafone owned by a UAE-backed telecoms business constituted a national security danger to the UK.
The Cabinet Office issued a notice late on Wednesday advising that Emirates Telecoms, also known as e&, possessed a 14.6% interest, which raised security concerns given Vodafone’s critical role in UK telecoms services.
The government has now ordered the formation of a “national security committee” at Vodafone to oversee and monitor any sensitive work carried out by the telecoms corporation that may have an influence on national security.
In 2016, the CMA and the European Commission banned Three’s proposed merger of O2, claiming that it would have resulted in higher prices.
However, in 2022, the UK telecoms regulator reversed its long-held attitude, stating that it was now more receptive to industry consolidation. Ofcom previously stated that limiting a country’s networks to only three might hurt customers.
Vodafone UK has a number of government contracts, and Three UK is controlled by Hong Kong-based CK Hutchison, raising worries about foreign joint ownership of an important national asset, especially given the city’s status as part of China.
Vodafone UK holds public sector contracts with the Ministry of Defence, the Ministry of Justice, NHS 111, and local police forces.
Ahmed Essam, the president and CEO of Vodafone UK, said: “We strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players.”
The two businesses are the UK’s third and fourth largest operators, respectively. If the merger is approved, the newly combined business will have more than 27 million members, surpassing BT-controlled EE and Virgin Media O2, owned by Spain’s Telefónica and the US-listed corporation Liberty Global.
Robert Finnegan, CEO of Three UK, stated, “We are confident that this transaction will deliver significant benefits to our customers, the country, and competition, and we look forward to working closely with the CMA as they review our notification.”
