CMA probes Vodafone and Three UK’s planned merger

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The UK competition regulator has launched a formal probe into the planned merger of Vodafone’s domestic operations with CK Hutchison’s Three UK, which is expected to create Britain’s largest mobile operator.

On Friday, the Competition & Markets Authority said it was formally assessing the tie-up, having initially sought views from the market on whether the blockbuster deal would harm competition in October last year.

The start of the probe comes two days after the government said that a stake in Vodafone held by a United Arab Emirates group was a national security risk.

The Cabinet Office on Wednesday ordered Vodafone to take steps to mitigate the risk of its strategic relationship agreement with Emirates Telecommunications, which is also known as e&, and is its largest shareholder.

CMA chief executive Sarah Cardell said the probe would assess how the “tie-up between rival networks could impact competition”.

The closely watched merger would create a combined business with a market share of more than 30 per cent in mobile. It will also reduce the number of operators in the UK from four to three.

Cardell said the deal would bring together two of the major players in the UK telecommunications market, which she said was “critical to millions of everyday customers, businesses and the wider economy”.

The deal is the latest high-profile tie-up to come under the CMA’s scrutiny, and comes after Adobe abandoned its $20bn acquisition of product design company Figma in December, saying there was no “clear path to receive necessary regulatory approvals” from watchdogs in the UK and Brussels.

The CMA also came under fire for its handling of Microsoft’s $75bn acquisition of Activision Blizzard last year, the video games industry’s biggest deal. The CMA forced significant structural changes to the tie-up, which it ultimately approved, but drew criticism from business leaders and legal advisers over the lengthy nature of the process.

The CMA began asking for views on whether Vodafone’s deal with CK Hutchison’s Three UK could affect the options and prices available to customers last year. The tie-up was first announced in June after talks had been ongoing for more than a year.

Ahmed Essam, chief executive of Vodafone UK, said the proposed merger would “significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete” with rivals BT and Virgin Media O2. 

The companies have committed to investing £11bn over 10 years to support the rollout of standalone 5G networks.

Robert Finnegan, chief executive of Three UK, which is owned by Hong-Kong based CK Hutchison, said this would help the UK “realise its ambitions to be a frontrunner in digital connectivity”.

He added customers would “enjoy faster, more reliable coverage over more of the country — and without paying a penny extra” from the first day of the combined entity. 

The CMA has up to 40 days to assess the merger as part of a so-called “phase 1” investigation, and will then decide whether to move into an in-depth probe.

The deal could also be looked at under the National Security and Investment Act, in which the government is able to review — and ultimately block — foreign takeovers of companies in industries that have ties to national security.