UK regulator approves £16.5bn combination of Vodafone and Three

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The UK competition regulator has approved the £16.5bn merger of Vodafone’s domestic business with CK Hutchison’s Three UK, which is expected to create Britain’s largest mobile operator.

The Competition and Markets Authority on Thursday said the deal should be allowed to proceed if both companies sign binding commitments to invest billions to roll out a combined 5G network across the UK and agree to shorter-term customer protections.

The CMA last month paved the way for the tie-up after announcing the deal could proceed as long as the companies addressed competition concerns. The watchdog had warned in September that the merger could lead to higher bills for tens of millions of customers and demanded changes.

The tie-up, first announced in 2023, will reduce the number of operators in the UK from four to three.

The legally binding commitments require the delivery of the joint network upgrade over the next eight years. The companies must also cap the prices of some mobile tariffs and data plans, as well as offering preset prices and contract terms for wholesale services, for three years.

The use of such measures — known as behavioural remedies — rather than more drastic structural changes such as divestment of parts of the business is a rare step for the regulator.

Stuart McIntosh, chair of the inquiry group leading the investigation, said: “We believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed — but only if Vodafone and Three agree to implement our proposed measures.”

UK communications regulator Ofcom and the CMA will oversee the implementation of the commitments made by the companies to address the competition authority’s concerns. The companies have pledged to invest £11bn in the network.

In a joint statement, the companies welcomed the announcement and said the merger “creates a new force in UK mobile, unleashing more competition and investment to transform the UK telecoms landscape”.

When the deal was announced in June 2023, the companies said Vodafone would own 51 per cent of the combined business with an option to acquire CK Hutchison’s 49 per cent stake after three years if the merged group reached an enterprise value of £16.5bn.

The UK competition regulator launched a formal probe into the deal in January, and began a full-blown investigation in April.

The combination was cleared by the UK government under the National Security and Investment Act in May subject to conditions, including the establishment of a national security committee within the merged business.

“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,” said Vodafone chief Margherita Della Valle.

Canning Fok, deputy chair of CK Hutchison, said the network investment plan would ensure “customers across the country benefit from world-beating network quality”.

The CMA had previously raised concerns that “higher bills, or reduced services, would negatively affect those customers least able to afford mobile services”. It had also provisionally said the deal would negatively affect wholesale customers — mobile virtual network operators such as Sky Mobile and Lebara — which do not have their own networks.

Karen Egan, head of telecoms at Enders Analysis, said the CMA’s decision was “a sensible way of giving the companies what they need to survive whilst ensuring that consumers are protected from a pricing perspective and getting the uplift in network quality that the merger promises”.

The merger is expected to formally complete during the first half of 2025.