Britain's competition regulator is kicking off a deeper investigation into the potential impact caused by the merger of Vodafone and Three in the UK after neither resolved previously expressed concerns.

Toward the end of last month, the Competition and Markets Authority (CMA) said that the alliance could result in increased prices for customers and lower investment in UK mobile networks, and as such intended to refer the transaction to a Phase 2 process.

The watchdog confirmed today in a statement that it will run an "in-depth investigation" of the anticipated joint venture. It further warned that the tie-up could have negative consequences.

The merger "may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom for goods or services, including for the supply of: retail mobile telecommunications services to end consumers in the UK, including both consumers and business customers; and wholesale mobile services in the UK."

The statutory deadline for the Phase 2 probe is September 18 with a four-person inquiry group presiding, including CMA chair Stuart McIntosh, Stuart Rose, Ashley Gunn, and Crispin Wright.

As readers might expect, both Vodafone and Three are wholeheartedly behind their merger. Vodafone reiterated to us last month that the enlarged organization will invest £11 billion ($13.,92 billion) into 5G technology, and give them the scale to compete with the UK's other major telcos, BT and Virgin Media O2.

Robert Finnegan, CEO at Three UK, told us: "The current market structure is holding the UK back, which is not good for customers or competition. By creating a third player with the necessary scale to invest, the combination of our two companies will deliver one of Europe's most advanced networks and move the UK into the digital fast lane, benefiting customers from Day One."

Unions aren't nearly so keen on the pair consummating the agreement, with Unite's executive head casting its objections as "taking a stand for workers and consumers, against corporate greed and wheeling dealing."

Under the terms of the agreement, Vodafone would own a 51 percent stake in the joint venture and Three owner CK Hutchison the remainder.

Paulo Pescatore, founder of analyst PP Foresight, told us the Phase 2 process was "widely expected. In fact, any other outcome would have been a surprise. There are some concerns which need to be addressed."

"Therefore, expect both parties to agree to concessions on spectrum and the merged entity will have to provide solutions on areas like network sharing, rather than create another problem. Both parties need to demonstrate that this is genuinely in the interest of UK plc, the economy, and consumers for it to have a chance of getting over the line.

"A marriage of convenience makes sense. Scale is key to help lower costs and improve margins. It could take years before we see the real fruits of this deal come to fruition if it goes ahead. The question is, can the UK wait that long?

"However, convergence still remains the Achilles' heel if this does get over the line. It would create a mobile champion that could increase competition in the wholesale segment of the market and become a partner of choice for MVNOs."

Both Vodafone and Three would do well to take the CMA's investigation seriously, as they are likely to do. Meta's buy of Giphy fell afoul of the CMA, the probe into Microsoft's purchase of Activision Blizzard ran anything but smoothly, and other deals held up by the regulator - and those in other nations - include those of Nvidia and Arm, and Adobe and Figma. ®

https://www.theregister.com//2024/04/04/vodafone_three_cma/