Vodafone and Three's proposed merger has been cleared by the UK’ Competition and Markets Authority (CMA), paving the way for the £15 billion ($19bn) deal to go ahead.
Approval of the merger comes after the CMA carried out an 18-month investigation into the proposal.
The UK’s next big telco merger - Vodafone and Three?
Will four become three in the UK? Advanced talks between Vodafone and Three have got the industry talking about a potential merger and its chances of success.
First announced two years ago, the deal will create the UK's biggest mobile network operator, with an estimated 29 million customers. It also consolidates the number of network operators from four to three.
Last month, the CMA said it provisionally approved the £15 billion ($19bn) deal, provided that certain remedies were met.
The CMA said today (December 5), that it has given the green light to the deal, provided "both companies sign binding commitments to invest billions to roll out a combined 5G network across the UK."
Both telcos also agreed to shorter-term customer protections, requiring them to cap certain mobile tariffs and offer preset contractual terms to mobile virtual network operators, for a period of three years.
The two telcos have also committed to significant network investments to invest £11 billion ($14bn) to upgrade the merged company’s network across the UK, including the roll-out of 5G, softening the CMA's stance on the deal.
"It’s crucial this merger doesn’t harm competition, which is why we’ve spent time considering how it could impact the telecoms market," said Stuart McIntosh, chair of the independent inquiry group leading the investigation.
"Having carefully considered the evidence, as well as the extensive feedback we have received, we believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed – but only if Vodafone and Three agree to implement our proposed measures."
The CMA's decision to approve the merger follows concerns it raised in September that the deal could harm competition. It then provisionally cleared it last month.
The merger will see Vodafone own 51 percent of the company, while the CK Hutchison's Three will own the remaining 49 percent stake. After three years following completion and subject to certain conditions, Vodafone may acquire Hutchison's stake via a Put and Call option, the telco said today.
“Today’s decision creates a new force in the UK’s telecoms market and unlocks the investment needed to build the network infrastructure the country deserves," said Vodafone CEO Margherita Della Valle.
"Consumers and businesses will enjoy wider coverage, faster speeds, and better-quality connections across the UK, as we build the biggest and best network in our home market. Today’s approval releases the handbrake on the UK’s telecoms industry, and the increased investment will power the UK to the forefront of European telecommunications.”
Canning Fok, deputy chairman of CK Hutchison and chairman of CK Hutchison Group Telecom Holdings, added: "When Three and Vodafone are combined, CK Hutchison will fully support the merged business in implementing its network investment plan, the cornerstone of today’s approval by the CMA, transforming the UK’s digital infrastructure and ensuring customers across the country benefit from world-beating network quality."
The merger is expected to go through in the first half of 2025.
Lengthy wait
Gaining approval for the deal hasn't been straightforward for the two companies.
Aside from the concerns put forward previously by the CMA, rival telco BT hit out at the deal, noting it would "create a merged entity with a disproportionate share of capacity and spectrum."
A report earlier this year revealed that Vodafone and Three would own a 61 percent share of the UK mobile network capacity.
However, Vodafone struck a new network-sharing deal with Virgin Media O2, the country's other big telco, that includes plans for Virgin Media O2 to acquire spectrum from Vodafone.
The deal also received a lot of backlash from union, Unite, which campaigned against the merger. Unite said the deal could pose a threat to the UK's national security, noting Three's parent company CK Group’s ties to Beijing.
Both Virgin Media O2 and EE are companies founded through a series of mergers.
Historic
The deal has been heralded as a historic one for the UK's telecom industry.
"This mega-merger marks one of the most significant moments in the history of UK mobile, heralding the arrival of a new market leader with a combined 29 million customers," said Kester Mann, director, consumer and connectivity, CCS Insight.
"The outcome – after months of intense regulatory scrutiny – is about as good as it could have got for Vodafone and Three. Not only did they secure approval, but the agreed remedies and commitments are less onerous than feared."
According to Mann, the deal could give confidence to other European telcos looking to merge, as market consolidation grows.
Meanwhile, James Gray, MD of Graystone Strategy, said he expects the deal to provide an opportunity for MVNOs.
"There has been a lot of discussion about the importance of wholesale and MVNOs to drive competition. If the proposed CMA remedies are effective, it presents lots of opportunities for new start-up mobile brands," said Gray.
"There’s also an opportunity for the vendors touting digital-only technology solutions that will help get the new businesses up and running quickly. I think it would also open up use of AI, which would take on the heavy lifting of understanding customers and giving them a mobile service they actually want to use."
