- Analysts agree that the latest CMA move suggests a merger approval is in the cards
- The competition watchdog is now seeking feedback on a remedies working paper
- A final decision is due by December 7
The U.K.’s Competition and Markets Authority (CMA) has sent a strong signal that the proposed merger of Three UK and Vodafone UK is likely to be approved by the deadline of December 7.
The competition watchdog on Tuesday issued a statement that indicated it is ready to accept the proposed remedies offered by Vodafone and Three to finally allow their planned merger to proceed.
It provisionally has found that a “multi-billion-pound commitment” to upgrade the merged operator’s network across the U.K., including the rollout of 5G combined with short-term customer protections, "could solve competition concerns identified in September and allow the merger to go ahead.”
The CMA has now set out a remedies working paper to seek views on the effectiveness of a proposed remedy package and is inviting feedback by November 12.
In their joint response, Vodafone and Three said they will need to study the working paper in detail, but said they believe it “provides a path to final clearance of their merger.”
“An appropriate balance appears to have been struck by ensuring that the significant benefits of the merged company’s investments can be realized in full and at pace to the benefit of the country and its citizens, while addressing the CMA’s stated concerns. However, it is essential that balance is preserved through to the end of the process, reflecting that the parties have offered extensive remedies, including by making their future network roll-out fully enforceable,” the two operators said.
Almost time to pop the corks?
Analysts that have been closely following proceedings agree that approval looks increasingly likely. According to CCS Insight analyst Kester Mann, Vodafone and Three can even “tentatively order in the champagne” following the statement from the CMA.
PP Foresight analyst Paolo Pescatore noted that the statement on the remedies working paper is “another key step towards approval, which is still earmarked for early December. It underlines the huge effort undertaken by all parties to address the competition concerns. However, the devil is in the detail.”
Karen Egan, head of telecoms at Enders Analysis, also said the CMA appears to have all but approved the proposed Vodafone-Three merger.
Writing on LinkedIn, Egan said the CMA believes that the merger could be pro-competition “so long as it can be assured that the network promises of the merging parties will be fulfilled, and that the short-term customer protections that it talked about in its provisional findings (social tariffs, contract terms rolling over, wholesale reference offer) can be put in place.”
Egan pointed out that this is a step forward from the CMA’s provisional findings, “where it put forward such remedies, but also discussed structural remedies (although largely discounted them), and listed blocking the merger altogether as a remedy (which it did not discount).”
Moreover, Egan commented that it is “heartening to see that the CMA has taken the time to get to grips with the complexities of the industry to an extent which allows it to seemingly make a decision which might be counter to the knee-jerk assumption that four to three mergers are anti competition."
Enders Analysis has long advocated that the increase in network quality implicit in this merger and the resultant 25% increase in industry capacity will make the industry more competitive rather than less, she added.
“The UK will be better off if, as seems, this merger is finally approved by December 7. The counterfactual of a slow painful retreat by Three from the UK market, and seismic cost-cutting by Vodafone UK would not have yielded a positive outcome for the economy or consumers,” Egan concluded.
Mann also observed that approval would “mark one of the most significant developments in the history of UK mobile, heralding the arrival of a new market leader with over 29 million customers.”
However, he warned that the CMA’s statement won’t be welcomed by all. “BT and Sky Mobile have sternly opposed the deal and are likely to vociferously attempt one final time to have it blocked before the CMA’s final deadline in less than five weeks,” he said.