Vodafone and Three disagree with regulator's provisional merger findings

The planned merger of telecoms giants Newbury-based Vodafone and Three has provisionally been found to have competition concerns, according to the watchdog CMA.

The Competition and Markets Authority (CMA) said an investigation had concluded that the deal could lead to price increases for tens of millions of mobile customers or see them get a reduced service.

READ MORE: Vodafone–Three merger under scrutiny from Competition and Markets Authority

It also provisionally found that it would negatively impact ‘wholesale’ telecoms customers - Mobile Virtual Network Operators (MVNOs) such as Lyca Mobile, Sky Mobile and Lebara - which rely on the existing network operators to provide their own mobile services.

Talks between Vodafone and Hutchinson CK, the owner of Three, have been ongoing for around a year and include a pledge to invest £11 billion in the UK over the next decade.

These provisional findings from the regulator come after a five-month investigation into the e tie-up, which would create the largest mobile operator in the UK, with more than 27 million customers.

In a joint stock market statement, Vodafone and Three said they disagreed with the CMA's provisional findings that the merger raises competition concerns and could lead to price rises for customers.

Margherita Della Valle, Vodafone's chief executive, said in the statement: "Our merger is a catalyst for change. It's time to take off the handbrake on the country's connectivity and build the world-class infrastructure the country deserves.

"We are offering a self-funded plan to propel economic growth and address the UK's digital divide."

Robert Finnegan, chief executive of Three UK, added: "The current UK 4 player mobile market is dysfunctional and lacks quality competition with 2 strong players and 2 weak players.

"This is reflected in the current state of the UK's digital infrastructure that everyone agrees falls well short of what the country needs and deserves.

"We are determined to reassure the CMA in relation to their provisional concerns and work with them to secure the extensive benefits this merger brings for UK customers, businesses and wider society."

The CMA though did say the merger "could improve the quality of mobile networks and bring forward the deployment of next generation 5G networks and services, as claimed by Vodafone and Three".

But it added that it currently considered that these claims are "overstated" and that the merged firm would not necessarily have the incentive to follow through on its proposed investment programme after the merger.

The CMA has put forward a number of remedies for Three and Vodafone to improve the offer and lessen its impact on competition.

The two companies will be given time to respond and offer remedies, with a final decision expected by December 7.

Stuart McIntosh, chair of the inquiry group leading the investigation, said: "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."