Vodafone (VOD.US)'s deal to merge its UK branch with Three, a subsidiary of Changhe (00001), to create the UK's largest mobile operator is facing in-depth scrutiny.
The Zhitong Finance App learned that Vodafone (VOD.US)'s deal to merge its UK branch with Three owned by Changhe (00001) to create the UK's largest mobile operator faces in-depth scrutiny unless Vodafone takes remedial measures to dispel the concerns of UK regulators. The UK Competition and Markets Authority (CMA) said on Friday that it is concerned that the merger will lead to a drastic reduction in competition between British consumers and businesses, and hopes to test the company's claims that the deal will help investment. The bureau asked Vodafone to reach an acceptable agreement with the agency within five days.
The deal will combine the two smallest of the UK's top four mobile operators to form a scale in the highly competitive mobile market. This will increase the number of mobile network operators of a certain size in the UK from two to three, but at the same time reduce the total number of operators.
Getting approval from UK regulators will be a challenge. Before Brexit, Three tried to buy O2, but was blocked by European regulators. One of the main reasons was that the UK's mobile network operators would be cut from four to three. However, Vodafone and Three believe that a well-funded operator can better compete in the UK's domestic mobile market.
The CMA said the deal could increase prices, reduce the quality of user experience, and affect investment in UK mobile networks. They are also concerned that the deal could affect smaller virtual mobile networks, including SkyMobile, Lebara, and LycaMobile.
“Vodafone and Three have repeatedly claimed that their merger is beneficial to competition and investment, but CMA has so far not seen enough evidence to support these claims.” Julie Bon (Julie Bon), one of the CMA's decision makers, said.
Ahmed Essam (Ahmed Essam), CEO of Vodafone UK, said: “Through the merger, we will be able to invest £11 billion to help the UK become the next world leader in 5G technology and enhance competition in the industry.”
Three UK CEO Robert Finnegan (Robert Finnegan) also said: “This merger will provide one of Europe's most advanced networks and push the UK onto the digital fast track, benefiting customers from day one.”
Vodafone and Three's competitors are British telecom operator BT Group and Virgin Media O2 [co-owned by Liberty Global Plc (Liberty Global Plc) and Telefonica SA (Telefonica SA) after merging the UK business in 2021]. Unlike Vodafone and Three, these two major operators also have fixed networks and can sell broadband to consumers.
In addition to this, it is expected that this merger will also trigger a review of Britain's new national security system. The system has veto power, and the government will conduct security reviews on transactions involving sensitive technology such as telecommunications.
According to reports, the in-depth investigation will take 24 weeks to complete, and may be extended for another 8 weeks.