Britain’s competition regulator is set to scrutinise the long-awaited tie-up of Vodafone and Three, announced yesterday.
The deal will create the largest mobile network in the UK.
Vodafone boss Margherita Della Valle said the merger is “great for customers, great for the country and great for competition”, but commentators warned last night the CMA was likely to turn a critical eye to the deal.
In 2016, the watchdog made clear their “serious concerns” about the merger between large network providers Three and O2, leading the European Commission to block it.
Pablo Pescatore, a telecoms analyst, said the failure of 2016 has set a precedent and this could be a “hard sale given that both companies have been outperforming the market for the last year or so”.
Through Mergeco, Vodafone and Three believe they are “levelling the competitive playing field” with other network giants, BT-owned EE and Virgin Media’s O2.
Head of financial analysis at AJ Bell Danni Hewson said the increase in consumers will lessen competition even if the service is improved and the CMA will take into account “such dominance down the line”.
“The i’s have been dotted and the t’s crossed. But the devil is always in the detail and the CMA will be interrogating every word, especially those in small print,” Hewson added.
In addition to the potentially increased competition, the CMA will also consider Mergeco’s investment into 5G infrastructure, said Olexandr Kyrychenko, partner at IMD Corporate, giving reason for some optimism.
Conditional approval is common and he expects that “conditions acceptable to CMA can be implemented”.
Over the next ten years, Mergeco plans to invest £11bn in its UK 5G network which could in turn generate £5bn per year by 2030 as well as bolstering the digital transformation of businesses across the nation.
Hargreaves Lansdown equity analyst Matt Britzman also believes hope could exist “given how challenging and expensive the 5G rollout is”.
“There’s a good argument that the economics of the industry need to improve for the benefit of both providers and consumers,” he said.
On a note of caution, Professor Suzanne Rab, competition law barrister at Serle Court chambers, said the CMA will want to see Mergeco’s promises “clearly substantiated” by strong economic evidence and argument.
The CMA said it will investigate the impact this deal could have on “millions of customers and many businesses” and publish results on their website “in due course”.