The Vodafone/Three UK Merger: What We Know So Far

In 2023, mobile networks Vodafone UK and Three UK announced plans to merge and create the largest mobile firm in the UK.

The news was significant, after much speculation, with both companies eager to partner to deliver one of Europe’s leading 5G networks. Both parties said the merger would hope to offer better choice and value for mobile and broadband customers across the country, in addition to driving greater innovation and economic growth. 

However, the Competition and Markets Authority (CMA) - a UK government department - recently conducted an investigation that suggested the merger could actually lead to millions of customers having to pay more. Releasing its provisional findings in September 2024, the CMA noted it was particularly concerned about the impact on customers least able to afford mobile services.

Prioritising the customer

Findings by the CMA alluded to a market monopoly, suggesting: “The merger would reduce the number of network operators from 4 to 3, making it more difficult for mobile virtual network operators (MVNOs) to secure competitive terms, restricting their ability to offer the best deals to retail customers.”

Impacting MVNOs (ie. Lyca Mobile, Sky Mobile and Lebara) in this way would be significant, given that their customers rely on them to provide their own mobile services. As a result, the CMA has so far concluded that the merger would lead to a “substantial lessening” of competition in the UK, both across retail and wholesale mobile markets.

A final decision from the CMA is expected by 7th December 2024.

Both Vodafone and Three UK have contested these arguments, with Vodafone in particular disagreeing with a “number of elements” in the CMA’s provisional findings. “The companies will continue to positively engage with the CMA to resolve outstanding matters ahead of the final report on 7th December 2024,” Vodafone’s statement reads.

The CMA will now consult on its findings and potential solutions, particularly concerning its competition concerns, which include measures to protect both retail customers and wholesale customers. It reserves the right to prohibit the merger should it deem these concerns are unable to be met.

Scaling up 5G networks

Both Vodafone and Three UK state they are committed to bolstering the nation’s 5G networks. Significantly, they state that they seek to improve infrastructure through an £11bn (US$14.7bn) investment into a 5G Standalone network that would reach more than 99% of the UK’s population.

Indeed, the CMA has found that the merger could improve the overall quality of mobile networks via the integration of Vodafone and Three networks. However, it is cautious that both companies saying they could bring forward the development of next generation 5G networks and services is overstated. It will need to be confident that both Vodafone and Three UK will deliver on these claims if the merger is approved.

“The next three months may prove to be the most pivotal in the history of the UK telecoms sector,” comments Kester Mann, Analyst and Director of Consumer and Connectivity at CCS Insight.

“The CMA offers a potential path to approval through a range of remedies. Crucially, it appears willing to consider “behavioural remedies” such as enhanced network access for virtual providers or safeguards for retail customers. In this sense, Vodafone and Three should be encouraged by the tone of the CMA’s report which appears more open to the merger than expected.”

“I retain my view that approving the merger would be the best outcome for the future of the UK mobile industry,” Kester adds. “A combined Vodafone and Three can make more efficient investments and push BT and Virgin Media O2 to raise their game too, boosting the market’s long-term connectivity credentials.”

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