The UK Competition and Markets Authority (CMA) is launch a formal investigation into the proposed merger between Vodafone and Three UK.
The news comes as no surprise, given that the £15 billion ($19 billion) joint venture would reduce the UK's main infrastructure-owned mobile networks from four to three (the other two being EE and O2), and the duo had already allowed until the end of 2024 for the deal to be concluded. That's about 18 months since they first revealed their plans in June.
“This deal would bring together two of the biggest players in the UK telecommunications market, which is vital to millions of customers, businesses and the wider economy,” CMA chief executive Sarah Cardell said in a statement. “The CMA will assess how this merger between rival networks could affect competition before deciding next steps.”
Phase 1
Today's news marks the start of what is known as a “Phase 1” investigation, which will involve evaluating whether a proposed merger will create a “substantial lessening of competition,” while gathering key data from the parties involved, competitors, clients, among others. concerned parties. This initial market analysis phase can last up to 40 days, after which the deal can move into a more in-depth “phase 2” investigation that can last a further six months; Hence, Vodafone and Three have been allowed until 2024 for the agreement to be given the green light.
“It was certain that the CMA would open a formal investigation; it is also certain that it would proceed to a full Phase 2 investigation,” Tom Smith, former CMA legal director and now partner at law firm Geradin Partners, based in London, told TechCrunch. London. . “This means we should expect the CMA's final decision in the autumn.”
In fact, Three has been embroiled in a previous failed takeover effort, when its parent company Hutchison attempted to acquire O2 in a £10.25bn deal; this was scuttled by EU regulators, although the deal reappeared in 2022. when a European judicial advisor suggested the original court ruling must be dismissed. It's not entirely clear how this might affect this latest merger attempt, but Smith considers the deal all but dead, regardless of what any court may later determine.
“The previous Three/O2 merger is still technically in the EU courts, but in reality that deal is long dead,” Smith said. “The current agreement will be reviewed on its own merits in any case.”
With a full Phase 2 merger investigation likely to take place here, it will be up to Vodafone and Three to convince the CMA that the benefits outweigh reduced competition.
“We firmly believe that the proposed merger of Vodafone and Three will significantly improve competition by creating a combined business with more resources to invest in infrastructure to better compete with the two largest converged players,” said Vodafone UK chief executive Ahmed Essam. , it's a statement. “Our commitment to invest £11 billion will create capacity to meet the exponential growth in data demand and accelerate the rollout of Advanced 5G across the UK, delivering benefits to consumers and businesses across the country.”
National security
It's worth noting that there is, in fact, an additional regulatory aspect to this deal beyond competition concerns. On Wednesday, the UK Cabinet Office saying that a 14.6 percent share that the United Arab Emirates (UAE) telecoms group called my& has in Vodafone could pose a risk to national securityand ordered the creation of a security committee at Vodafone to “oversee sensitive work carried out by Vodafone and its group that impacts on or respects the national security of the United Kingdom.”
Three, for its part, is owned by CK Hutchison Holdingsa Hong Kong-based conglomerate that is subject to a national security law introduced by China in 2020.
“It has been clear for some time that the proposed merger will also have an additional regulatory dimension under the National Security and Investment Law given Three’s ties to China through its ownership in Hong Kong, and the impact of China’s national security law on Hong Kong,” Alex Haffner, competition partner at British law firm Fladgate, said in a statement. “This, coupled with UAE company e&'s recent 14.6% stake in Vodafone, which has already been subject to a security review by the UK government under the Act, means that “The merging parties now face high-level government and regulatory scrutiny over the deal.”
