CMA Begins Phase 2 Probe Of Vodafone Merger With Three UK

Deadline expired for Vodafone to allay CMA concerns over merger with Three UK. In-depth Phase 2 investigation begins

The Competition and Markets Authority (CMA) confirms it has now begun an in-depth Phase 2 investigation of the proposed merger between Vodafone UK and CK Hutchison’s Three UK.

The UK antitrust regulator confirmed on Thursday it “has referred the anticipated joint venture between Vodafone Group Plc and CK Hutchison Holdings Limited concerning Vodafone Limited and Hutchison 3G UK Limited for an in-depth investigation.”

Back in June 2023 Vodafone UK and the Chinese owner of Three UK (CK Hutchison) had finally agreed the long touted merger of their respective UK mobile operations.

Antitrust investigation

The deal will combine the companies’ telecommunications operations under one single network provider, for a total of 27 million mobile customers, instantly making the combined entity the biggest mobile operator in the UK.

Vodafone UK will own 51 percent of combined entity, and the merger is being touted as allowing it to present an improved challenge to rival domestic players BT/EE and Virgin Media O2.

But the UK antitrust regulator has been watching and is concerned.

In January this year, the CMA had begun a Phase One investigation of Vodafone UK’s merger with Three UK.

Then last month it concluded its phase one investigation, and said it had concerns the merger could lead to mobile customers facing higher prices and reduced quality.

The CMA’s Phase 1 investigation noted that Three UK is generally the cheapest of the four mobile network operators, and it is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers.

Both Vodafone UK and Three UK were then given five working days to respond with meaningful solutions to the CMA, otherwise the deal would be referred to a more in-depth Phase 2 investigation.

“On 28 March 2024, the Parties informed the CMA that they would not be offering any undertakings,” the regulator said in a statement on Thursday.

Therefore the in-depth Phase 2 investigation has now begun, and will see an independent panel of experts probing in more depth initial concerns identified at Phase 1.

Downsizing, right-sizing?

The Phase 2 antitrust investigation could potentially derail the downsizing plan of Vodafone’s chief executive officer Margherita Della Valle, who labels the merger as a key component of her “portfolio right-sizing” plan.

Vodafone CEO Margherita Della Valle.
Image credit Vodafone

As a reminder, Vodafone began a number of big strategic moves in May 2023, when the UK operator embarked on its “new roadmap”, that saw the axing of 11,000 jobs.

A key part of Vodafone’s new plan is the merger of Vodafone UK and Three UK.

Other parts of the plan are a retreat from certain European markets.

Vodafone last November exited the Spanish market, after agreeing to sell Vodafone Spain to UK-based telecoms investment firm Zegona Communications for $5.3 billion.

And then in March 2024, Vodafone reached a “binding agreement to sell 100 percent of its Italian operations (aka Vodafone Italy) to Swisscom AG” for €8bn in cash.

Last week the downsizing at Vodafone continued, after its German operation announced 2,000 jobs would be axed, representing 13 percent of the 15,000 workforce.