The Competition and Markets Authority (CMA) is accepting comments from interested third parties before it initiates its more detailed review of the deal

Earlier this summer, months of speculation were finally put to bed when UK mobile operators Vodafone UK and Three UK announced they had reached an agreement to merge their operations in a non-cash deal worth roughly £15 billion.

The deal would see Vodafone hold a 51% stake in the new business, with Three the minority partner with 49%.

The newly combined company would be the country’s largest mobile operator, with roughly 28 million customers at the time of announcement – enough, the operators say, to take on the dominant market position of incumbent BT.

Vodafone has been hugely vocal about the potential benefits the merger will have for the UK telecoms landscape, boasting it will allow for improved customers services, job creation, and increased investment in next generation technologies. The company claims, for example, that the merger will allow them to invest £11 billion to create “one of Europe’s most advanced standalone 5G networks”.

Overall, the companies suggest that the merger will generate synergies worth £700 million annually after five years.

But as effusive as the pair are about the benefits of the merger, the UK’s competition regulator was always going to be more reserved.

The merger will reduce the number of mobile players in the UK market from four to three, a step that has long been considered taboo in the UK and, indeed, across much of Europe. Back in 2016, for example, regulators blocked a proposed merger of Three and O2, arguing that three players was not enough to deliver effective competition at a national level.

However, attitudes towards market consolidation have seemingly softened of late, with the European Commission increasingly looking towards cross-border consolidation to help generate economies of scale and therefore boost telco efficiencies and financial performance.

But despite this thawing of regulatory feeling towards telco M&A, the CMA is still dubious that the Vodafone–Three merger can deliver all that it promises for the UK market.

As of today, the CMA is now accepting comments on the merger from interested third parties until November 1, after which it will launch a formal investigation lasting 24 weeks.

“Millions of consumers and businesses in the UK rely on Vodafone’s and Three’s mobile networks to stay connected,” said Sarah Cardell, chief executive of the CMA, in a statement. “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.”

The CMA also notes that its investigation cannot consider additional effects of the merger beyond competition, such as an increase or decrease in jobs. It also does not consider potential national security concerns, which the regulator notes is a matter for the UK government to handle via the National Security and Investment Act if necessary.

Ultimately, this is a standard regulatory step for a merger of this size and a precursor to the almost inevitable remedies that the CMA will propose in order to grant the merger the green light. What these concessions might be are a matter of speculation, but could include clauses forbidding the company from hiking prices for a number of years or divesting of mobile spectrum – a commodity in which the newly merged entity will hold a major advantage over rivals.

If the regulatory process proceeds as planned without any major hurdles, Vodafone and Three expect the deal to be completed before the end of 2024.

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