Vodafone and Three offer UK regulators new concessions on £16.5bn merger

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Vodafone and CK Hutchison’s Three UK have offered to cap price rises on some phone tariffs as they try to win approval for their £16.5bn domestic merger from the competition watchdog United Kingdom.

The companies reiterated on Monday that they do not agree with the Competition and Markets Authority’s provisional findings that the deal would raise prices for consumers.

They have also pledged to offer new prices for wholesale customers to access their network, but it is not clear whether this will be enough to remove obstacles to a deal the largest operator is expected to create of UK mobiles.

The regulator earlier this month announced the initial findings of an in-depth investigation into the deal, which was first announced in 2023, and called for changes to protect customers. He is due to make a final decision on whether the link can take place by December 7.

The companies’ proposals on Monday included keeping fares at £10 or less for “value-focused” customers on Three UK’s Sim-only brand Smarty, social tariffs and retention measures to protect vulnerable registered customers for two years.

When the deal was announced, Vodafone and Three UK said there would be no change to their pricing strategies and that social tariffs would continue to be offered. The latest pledges appear to be an attempt to ease the regulator’s lingering concerns.

Paolo Pescatore, founder and telecoms analyst at PP Foresight, said it “remains to be seen whether (companies have) done enough on pricing to alleviate the CMA’s concerns”, which “could be a sticking point that make or break it”.

Vodafone and Three UK said the merged company would also offer a three-year deal encouraging virtual mobile network operators with 2.5 million or fewer customers to access their network on pre-agreed terms.

Matthew Howett, founder and chief executive of Assembly Research, said companies’ willingness to address regulators’ concerns, even if they did not see them as substantial, showed that “they are prepared to navigate the path that the CMA has laid out to see the merger approved”.

The companies have already committed to investing £11 billion in their network and for communications regulator Ofcom to monitor and enforce what they described as “a once-in-a-generation opportunity to transform the digital infrastructure of United Kingdom”.

They also agreed to sell spectrum to Virgin Media O2 after the merger was approved as part of its new long-term network sharing deal with Vodafone UK announced in July.

Vodafone and Three UK said they “strongly believe the merger is pro-competitive” and “remain confident we can work with (the CMA) to get approval”.

The regulator said this month that its “Phase 2 investigation” into the merger “tentatively concluded that the merger will result in price increases for tens of millions of mobile customers or see customers benefit from reduced service, such as smaller data packages in their contracts. “.

Earlier this year, the CMA opened an investigation into the deal, which would reduce the number of network operators from four to three, after an initial review found the companies did not provide enough evidence that the link would benefit investment and competition .

Tom Smith, competition lawyer at Geradin Partners and former legal director of the CMA, said: “There is still a chance that the deal will simply be blocked at the end of it, but both sides seem very open to this unprecedented package of remedies.”

Additional reporting by Suzi Ring