- The two operators respond to concerns over pricing and impact on MVNOs
- Despite the additional commitments, the two continue to rail against the CMA’s provisional findings
- Vodafone also announced hat shareholder approval is no longer required for its pending U.K. and Italian transactions
Vodafone UK and Three UK have made further commitments as part of efforts to secure regulatory approval for their proposed merger. However, they continue to assert that the merger is “pro-competitive” and that concerns about the impact on pricing are unfounded.
In their response to the Notice of Possible Remedies published by the U.K.’s Competition and Markets Authority (CMA) alongside its summary of provisional findings earlier this month, the two operators make a couple of pledges that are clearly designed to catch the market’s eye.
First, the operators say they will commit to maintaining certain tariffs at £10 or below for two years from the completion of the merger. Such prices are currently available under Three’s secondary brand Smarty as well as Vodafone’s Voxi brand including social tariffs.
A second measure addresses mobile virtual network operators (MVNO). Here, Vodafone and Three say they will provide a reference offer that encourages MVNOs to access additional network capacity.
Otherwise, the two wannabe merger partners point out that they have already made what they describe as two “substantive commitments”: to invest £11 billion in their network, monitored and enforced by U.K. telecoms regulator Ofcom; and the agreement to sell spectrum to Virgin Media O2 and extend the Beacon network sharing agreement.
Vodafone and Three battle on with CMA
They added that they “strongly believe the merger is pro-competitive” and remain confident that the outstanding issues can be resolved.
“The CMA’s final decision on the merger is not due until 7 December, and we will continue to positively engage with them to resolve outstanding matters,” they said.
According to PP Foresight analyst Paolo Pescatore, it is unsurprising that the operators are maintaining a defiant position “as they still disagree largely with the remedies.”
At the same time, he said it is encouraging to see a “clear willingness to work closely on a number of areas such as commitment to investment over the long period, price freeze on selected tariffs under £10 for two years and collaborating on increasing competition in wholesale.”
Pescatore added: “It remains to be seen if the entity has done enough on pricing to ease the CMA’s concerns. This could be a sticking point that makes or break it.”
On the whole, though, analysts appear to broadly agree that the CMA is offering the two operators a potential path to approval through the proposed remedies.
James Gray, managing director of Graystone Strategy, said he remains optimistic that the deal will go through. “The proposed intentions to manage the CMA are to be expected and should be welcomed as positive for protecting consumer choice,” he said.
However, Gray did note that the devil will be in the detail, in particular with regard to wholesale reference pricing for MVNOs.
Shareholder votes no longer needed
Meanwhile, a separate announcement from Vodafone also indicated that shareholder approval will no longer be required either for the Vodafone-Three transaction or the planned sale of Vodafone Italia to Swisscom.
According to the group, this is because of the entry into force of new U.K. Listing Rules on July 29, 2024.
Earlier this year, the U.K.’s Financial Conduct Authority (FCA) set out a simplified listings regime in an effort to boost growth on U.K. stock markets. The new rules remove the need for votes on significant or related party transactions and offer flexibility around enhanced voting rights. Vodafone said its two undertakings are classified as significant transactions.