Competition watchdogs warn of rising mobile phone prices due to Vodafone-Three merger

The planned £15 billion merger between Vodafone and Three could mean higher prices for millions of mobile customers, warns the UK Competition and Markets Authority (CMA). According to an economic assessment by the CMA, mobile phone bills could rise by 3 to 6 percent as a result of the merger. In the preliminary findings released today, the regulator further warned that consumers might also receive poorer services, such as smaller data packages in their contracts. The merger, announced last year, would create the UK's largest mobile network with around 27 million customers. Beyond rising prices, the CMA expressed concerns about the deal's impact on mobile virtual network operators (MVNOs) such as Sky Mobile and GiffGaff, which use the larger competitors' networks. The authority stated that MVNOs might no longer be able to secure competitive terms in the future, limiting their ability to offer the best deals to customers. Vodafone and Three argue that the merger is necessary to compete against larger rivals like EE and VMO2. The companies have committed to investing £11 billion over ten years and have made legally binding pledges on how this money will be used. Nevertheless, the CMA stated that the merger would lead to a significant reduction in competition in both the retail and wholesale markets. The regulator will now consult on its findings and possible remedies, including blocking the deal. A final decision is expected on December 7. Stuart McIntosh, chair of the CMA inquiry group, said: "We have thoroughly examined this merger and weighed the capital investment aimed at improving network quality and promoting 5G connectivity against the significant costs for customers and competing virtual networks." Vodafone and Three pushed back against the regulator’s findings, asserting that the merger can and should be approved. Margherita Della Valle, CEO of Vodafone, stated: "Our merger is a catalyst for change. It is time to unlock the country’s connectivity potential and build the world-class infrastructure it deserves." Robert Finnegan, CEO of Three UK, added: "The current four-player mobile market in the UK is dysfunctional and lacks quality competition. This is reflected in the current state of the country’s digital infrastructure, which does not meet expectations and needs." Previous mergers in the mobile sector have been fiercely rejected by regulators due to concerns that they would impair competition and drive up prices. Plans for a £10 billion merger between O2 and Three in 2016 were blocked for these reasons. However, Vodafone and Three argue that the market has changed significantly since then and that they need the scale to make substantial investments in building 5G networks. The CMA acknowledged that the merger could improve network quality and accelerate 5G rollout. However, the regulator described these claims as "exaggerated" and elaborated that the merged entity might not have the incentive to uphold its investment commitments once the deal is completed. The CMA is also considering a more radical measure that could force Vodafone and Three to sell off frequencies to enable a new competitor to enter the market. However, the regulator admitted that it is "concerned about the practicality of such a measure." Karen Egan, head of mobile at Enders Analysis, said: "Vodafone has already stated it is willing to make a binding commitment regarding planned network expenditures. The proposed temporary price controls for retail and wholesale, though perhaps unnecessary, are unlikely to be deal-breakers." Matthew Howett, founder and CEO of Assembly Research, added: "A deal of this size and scope was always going to be subjected to intense scrutiny by the CMA, and it was unrealistic to believe it could be approved without some form of remedy.