The UK’s competition regulator has warned that the planned merger of Three and Vodafone could see “tens of millions” of customers face higher prices or less generous talk plan allowances.
The two firms unveiled plans to merge last June, saying the tie-up would mean customers “enjoy a better network experience with greater coverage and reliability at no extra cost.”
However, a preliminary review by the Competition and Markets Authority (CMA) has found otherwise on the issue on price and raises concerns that customers could “get a reduced service such as smaller data packages in their contracts” as a result of the tie-up.
It also warns that reducing the number of mobile network operators from 4 to 3 could negatively impact the ability of companies such as Sky Mobile and Lebara, who buy services from the big four and resell to end users, to secure competitive terms.
The CMA review did find the merger could improve network quality and enable the deployment of next generation 5G networks and services, as claimed by Vodafone and Three.
However it “currently considers that these claims are overstated, and that the merged firm would not necessarily have the incentive to follow through on its proposed investment programme after the merger.”
The CMA will now consult on its provisional findings and on potential solutions to its concerns which include a ban on the merger, the partial sale of spectrum and network assets to create a new fourth operator, imposing time-limited customer protections and making the deal conditional on binding investment commitments.
Stuart McIntosh, chair of the inquiry group leading the investigation, said: “We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.
“We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments.”
A previous attempt by the owners of Three to merge the network with O2 was blocked by the European Union’s competition watchdogs.