Brit Competition Regulator Will Make Or Break Vodafone And Three Union

Britain's Competition and Markets Authority is asking the mobile industry for feedback on Vodafone's local merger with Three to determine if the agreement could negatively impact rivals, customers, or both.

The tie-up was confirmed in June, when the duo pledged to pour £11 billion ($13.9 billion) into the country's 5G infrastructure in the following decade.

The CMA, which is taking a far more active roles in mergers and acquisitions since Brexit, today asked interested parties to give their opinion of the Vodafone-Three fusion. The invitation close on November 1.

"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 at the CMA.

"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."

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Under the terms of the merger, Vodafone would own a 51 percent stake in the resulting company, currently referred to as "MergeCo" until a new brand is decided, should the transaction be approved. It would create the third major telecom operator in Britain, alongside BT and Virgin Media.

When the deal was announced earlier in the summer, Canning Tok, co-managing director at Three parent CK Hutchison, admitted: "Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital." The combined entity would be better placed to build a "best-in-class 5G network," he said.

The CMA's involvement is "unsurprising," according to tech analyst Paulo Pescatore at PP Foresight. He reiterated earlier comments that the merger will only be cleared when "both parties can demonstrate that this is in the genuine interests for UK plc (the economy, productivity, consumers)."

"Having said this, Ofcom recognizes the challenges of the UK mobile market and need for scale. Convincing the CMA of a failing firm will be the real test. Current investment levels are not sustainable in the longer term."

Kester Mann, director of consumer and connectivity at CCS Insights, told us the CMA's announcement "finally sets the wheels in motion for a lengthy investigation into a merger deal that would permanently reshape the UK mobile market."

"At this early stage, the deal appears poised on a knife edge and is too difficult to call either way. The next 12 months will see passionate lobbying and intensive debate ahead of the crucial decision. A leading factor in the eventual outcome will likely be to what extent the merged company is prepared to offer remedies and concessions. Should it be blocked, Vodafone and Three would be left with highly uncertain futures in the competitive UK market," he added. ®