UK's CMA says Vodafone/Three merger could lead to higher prices

Britain’s competition regulator on Friday said Vodafone and Hutchison Three’s £15bn merger could lead to higher prices for tens of millions of consumers and a “substantial" weakening of competition.

In its provisional findings into the deal, the Competition and Markets Authority cited retail and wholesale customers as two areas of concern but said it would explore solutions with the two companies before it makes its final decision in December. It also expressed worries about the impact on consumers least able to afford hefty price rises.

On the wholesale front, the CMA said a merger could hit mobile virtual network operators (MVNOs) such as Lebara, Lyca Mobile and Sky Mobile, who need major operators to run their own services.

The deal would cut the number of UK network operators to three from four, meaning these MVNOs would be unable to secure the most competitive terms and affect their offerings to customers.

“We have provisionally concluded that the merger would lead to price increases for tens of millions of mobile customers, or see customers get a reduced service such as smaller data packages in their contracts,” the CMA said.

“It would create the largest retail mobile operator by revenue in the UK and the second largest in terms of customers. We consider these findings to be particularly significant given that the parties collectively have over 27 million subscriptions in the UK which would be directly affected by any price rises.”

However, the CMA did concede that the merger could lead to better provision of 5G services, with Britain one of Europe’s laggards for coverage.

As expected, the two firms rejected the findings, saying the merger “will fix the country's dysfunctional mobile market characteristics, unleashing more competition and investment”.

The CMA has spent five months probing the deal which would create the UK's largest mobile operator, with more than 27 million customers.

Reporting by Frank Prenesti for Sharecast.com