Britain has given the green light to Vodafone’s $19 billion merger with Hutchison’s Three UK, paving the way for the country’s largest mobile operator.
The decision hinges on promises of a significant $14 billion investment in 5G infrastructure, outweighing initial concerns about reduced competition and potential price hikes for consumers.
The Competition and Markets Authority (CMA) approved the merger on Thursday, highlighting that the investment commitments made by Vodafone and Three UK could stimulate competition in the long term.
The CMA’s initial concerns that reducing the market from four to three major operators might drive up prices were addressed through a series of proposals by the merging companies.
“We believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed—but only if Vodafone and Three agree to implement our proposed measures,” the CMA stated.
The merger promises an £11 billion ($14 billion) investment in a state-of-the-art 5G network, which will serve 50 million customers, including subscribers of Vodafone’s network-sharing partner, Virgin Media O2.
This investment aligns with the UK government’s push to prioritise deals that enhance infrastructure and boost economic growth.
The companies also agreed to sell spectrum to VM O2, cap certain tariffs, and provide favourable contract terms for mobile virtual network operators, ensuring competitive dynamics are maintained.
This is the first major four-to-three telecom merger in a European market approved without requiring structural remedies, such as creating a new competitor. Analysts see this as a pivotal moment, signalling a shift toward prioritising investment and network quality over maintaining low prices.
Karen Egan of Enders Analysis remarked, “Three high-quality networks instead of four inferior ones will serve consumers and businesses better, breaking the cycle of low returns and low investment.”
Vodafone CEO Margherita Della Valle described the merger as transformative, stating that it would “unlock capital, unleash competition and investment, and boost economic growth by improving connectivity speeds.” She emphasised the role of advanced 5G in driving growth in science and technology sectors.
While the merger promises long-term benefits, integrating the two companies could be complex. Rivals like EE and VM O2, formed through earlier fixed-line and mobile mergers, may use this period to consolidate their market positions.
Della Valle noted that decisions on whether to retain both companies’ primary brands, as well as their value brands, Voxi and Smarty, would come later.
Under the agreement, Vodafone will hold a 51% stake in the combined entity, with an option to acquire the remaining 49% after three years, subject to conditions.
Vodafone’s shares, which have struggled in recent years, saw a modest 1% uptick to 71 pence in morning trading following the announcement.
The CMA’s decision underscores a growing recognition of the need for substantial investment in digital infrastructure across Europe. With this merger, Vodafone and Three UK aim to set a new standard for connectivity in the UK, promising better services for consumers and businesses alike.
