Three and Vodafone merger ‘could lead to higher prices’

THE £15bn merger between Vodafone and Three risks pushing up prices for millions of mobile customers, regulators have warned.

The Competition and Markets Authority (CMA) is preparing to launch an investigation after highlighting concerns that the deal could lead to higher costs for consumers and affect investment in mobile networks.

The companies have five working days to respond with remedies to resolve the CMA’s concerns. If they cannot satisfy the watchdog then the deal will move to a phase two investigation, which is expected to last six months.

Vodafone and Three announced plans to merge last year in a tie-up that will create the UK’s largest mobile network with around 27m customers.

It will also reduce the number of network operators in the country from four to three.

The CMA said its initial investigation had identified the risk that merging the two companies would reduce rivalry between mobile operators to win customers. The watchdog is also concerned the deal could make it more difficult for so-called “virtual” mobile operators such as Sky Mobile and Lebara, which piggyback off larger players’ networks, to negotiate good deals for their customers as they will have fewer host networks to choose from.

Vodafone and Three have argued that the tie-up is needed to give them the scale to compete with larger rivals EE, which is owned by BT, and Virgin Media O2. They have pledged to invest £11bn in their combined 5G network once the deal has completed.

Three yesterday revealed it had posted its first loss in 13 years in 2023 and warned its finances were unsustainable without the merger.

However, the CMA cast doubt on these claims, saying its initial review had found both companies were viable and competitive and would continue to invest in their networks regardless. It said this needed further assessment, given concerns that the merger would reduce overall incentive to invest.

Julie Bon, the CMA’s phase one decisionmaker for the case, said: “Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in UK mobile networks.”