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The investigation will take at least 24 weeks
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The CMA is concerned that users could face higher prices and reduced quality of services if the merger happens
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Three UK and Vodafone UK insist a merger would be good for the U.K. market
The U.K. Competition and Markets Authority (CMA) is pressing ahead with plans to refer the proposed merger of Three UK and Vodafone UK for a more in-depth investigation after the two operators apparently refused to commit to undertakings that may have eased the regulatory process.
In a statement on Thursday, the CMA indicated that the operators had not made use of a five-day period of grace to commit to measures that could have averted the need for a deeper probe.
The authority noted drily that the parties “informed the CMA that they would not offer such undertakings,” seemingly leaving it with little choice other than to refer the proposed merger for a phase two probe.
The investigation will take at least 24 weeks, with a current decision deadline of September 18, and could result in the merger being blocked.
Key concerns
The CMA announced in March that the first phase of its investigation had raised concerns that users could face higher prices and reduced quality of services if the merger of the nation’s third and fourth mobile network operators goes ahead.
The competition watchdog also pointed to the potential impact on smaller mobile virtual network operators including Sky Mobile, Lebara and Lyca Mobile. It said it had not seen sufficient evidence to back claims by the operators that their deal is “good for competition and investment.”
Three UK and Vodafone UK have continued to insist that their deal will be good for the U.K. market as it would create a stronger competitor with the scale to invest more in 5G and take on BT/EE and Virgin Media O2.
Vodafone, for instance, has warned several times that its ambitions for a speedy rollout of a standalone 5G network will be hampered if the merger is not permitted to go ahead.
Vodafone UK CEO Ahmed Essam also cited plans to invest £11 billion in 5G, while Three UK CEO Robert Finnegan said the current market structure “is holding the U.K. back, which is not good for customers or competition.”
According to a tweet by CCS Insight analyst Kester Mann, it was expected that “both sides declined to offer solutions to the CMA’s initial concerns around lessening of competition.”
Mann has previously noted that the CMA won’t be won over easily. In a blog late last year, he predicted that merger “will sneak through,” putting the chances of the deal gaining approval at about 60%.
In emailed comments to Fierce Network, Mann said he’d stick with the 60% estimate.
“Vodafone-Three is poised on a regulatory knife-edge, but if both parties are eventually willing to make further concessions – such as divesting assets like mobile spectrum – they should just about get it over the line,” he said.
PP Foresight analyst Paolo Pescatore commented in a recent blog that both parties “will need to demonstrate that a deal is genuinely in the interest of UK plc, the economy, and consumers for it to have a chance of getting over the line.”
He also expects the operators to agree to concessions on spectrum, “and the merged entity will have to provide solutions on areas like network sharing,” an area in which Vodafone UK currently partners with Virgin Media O2 (under Cornerstone); and Three UK with BT’s EE (under MBNL).