The £16.5 billion merger of telecoms giants Vodafone and Three has been given the green light by the Competition and Markets Authority.
In September the regulator threw the deal into doubt over competition concerns, with its investigation concluding that it would lead to price increases for tens of millions of mobile customers or result in smaller data packages while harming the position of mobile virtual network operators such as Sky Mobile, Lyca, Lebara and iD Mobile.
A provisional ruling in November found that a multi-billion-pound commitment to upgrade the merged company’s network across the UK – including £11bn to roll out 5G – combined with short-term customer protections could solve these concerns and allow the merger to go ahead.
The £11bn network investment will require no public funding and, as highlighted by the CMA, will “boost competition between the mobile network operators in the long term, benefiting millions of people who rely on mobile services”.
The companies described the merger as a “once-in-a-generation opportunity to transform the UK’s digital infrastructure”, adding: “Businesses large and small depend on high-quality connectivity and advanced 5G is also crucial for the growth of the UK’s science and technology sectors, as well as improving public services and narrowing the digital divide.”
Margherita Della Valle, CEO of Vodafone Group, said: “Today’s decision creates a new force in the UK’s telecoms market and unlocks the investment needed to build the network infrastructure the country deserves.
“Consumers and businesses will enjoy wider coverage, faster speeds and better-quality connections across the UK, as we build the biggest and best network in our home market.
“Today’s approval releases the handbrake on the UK’s telecoms industry, and the increased investment will power the UK to the forefront of European telecommunications.”
Canning Fok, deputy chairman of CK Hutchison and chairman of CK Hutchison Group Telecom Holdings, said: “We have been operating telecoms businesses in the UK for over three decades and Three UK for the past two.
“We have invested in the people and the infrastructure, helping to bring the benefits of mobile connectivity to UK businesses and consumers. When Three and Vodafone are combined, CK Hutchison will fully support the merged business in implementing its network investment plan, the cornerstone of today’s approval by the CMA, transforming the UK’s digital infrastructure and ensuring customers across the country benefit from world-beating network quality.”
Vodafone and Three say they will study the CMA’s final report in detail and continue to engage with the regulator as they put in place the final undertakings for the deal.
The merger is expected to formally complete during the first half of 2025. Vodafone will own 51% of the equity and, after three years following completion and subject to certain conditions, Vodafone may acquire Hutchison’s 49% stake via a Put and Call option.
Kester Mann, director, consumer and connectivity at tech consultancy CCS Insight – which has provided strategic support to Vodafone – added: “This mega-merger marks one of the most significant moments in the history of UK mobile, heralding the arrival of a new market leader with a combined 29 million customers.
“The outcome – after months of intense regulatory scrutiny – is about as good as it could have got for Vodafone and Three. Not only did they secure approval, but the agreed remedies and commitments are less onerous than feared.
“The CMA’s decision to approve the merger is the right one and largely strikes a good balance between nurturing competition and encouraging investment. It should pave the way for more-efficient investments to bring about much-needed improvements to mobile services in the UK.
“With approval secure, the hard work really begins. The merged company’s biggest task will be to combine two established mobile networks with a complex assortment of network suppliers. CEO Max Taylor will also face difficult decisions in areas such as brand, retail, jobs, and market positioning. Rivals should be ready to pounce if any stage of the integration goes awry.
“The outcome is a positive one for the broader European sector, which has been clamouring for greater leniency on mergers for years. It may give operators in other markets fresh confidence to strike new deals of their own.”