Vodafone-Three UK merger may push bills up says UK watchdog

Both providers disagree with the competition regulator’s concerns and say merger should be approved because it will fix a 'dysfunctional 'mobile market

A final decision on whether to allow the merger to go through will be made in December. 

The prospective £14.45bn (€17bn) merger in the UK of telecoms companies Vodafone and Three could push up bills for millions of mobile customers and impact providers like Sky Mobile by reducing the number of networks from four to three, the country’s competition regulator has said.

However, the Competition and Markets Authority (CMA) also said the deal could improve network quality and speed up the deployment of next generation 5G, adding it would examine solutions to its concerns before making a final decision on the matter in December.

The tie-up, announced 15 months ago between Vodafone and Three UK, owned by Hong Kong's CK Hutchison, has challenged the regulator's previous stance that four networks are required to keep prices low.

Both operators have argued the deal would create a stronger third player that could compete more effectively with market leaders BT's EE and Virgin Media O2.

"We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the  potential longer-term benefits of the merger, including by guaranteeing future network investments," CMA inquiry chair Stuart McIntosh said.

Vodafone and Three said they disagreed with the CMA's view that the deal raised competition concerns and could lead to price rises for customers.

No final decision

"This is not a final decision, and we look forward to working with the CMA to secure approval," they said in a joint statement.

The remedies suggested by the CMA included a commitment on network investment, although it said this might not be sufficient on its own to address all of its concerns.

Others included protection for customers, such as allowing them to "roll over" their existing terms for a defined period.

In the wholesale market, it said pre-agreed terms could be made available to third-party providers such as Lyca Mobile, Sky Mobile and Lebara.

Those providers, which use the four major networks, could also have a chunk of the merged company's capacity ring-fenced, it added.

The merger, should it go through, will not impact either of the companies' operations in the Republic of Ireland.

While the UK mulls the decision as to whether the deal should be allowed to go through, in Europe former president of the European Central Bank Mario Draghi said the EU should allow more mergers in the telecommunications sector in order to “deliver higher rates of investment in connectivity,”.

In his long-awaited report on the bloc’s competitiveness, Mr Draghi said there should be less focus on country-level consolidation before there are competition issues and more on scrutinising mergers when there are signs that companies are abusing their dominance.