Vodafone and Three’s Mega Merger Won’t Impact Customer Prices

Vodafone and Three Merger: Impact on Prices and Competition

Background

On December 5, 2024, the UK’s largest mobile network merger was approved by the regulator, the Competition and Markets Authority (CMA). The £16.5 billion tie-up between Vodafone and Three will create a massive mobile network with 27 million customers.

Regulatory Conditions

The CMA imposed conditions on the merged companies to invest billions in the country’s 5G network and cap certain mobile tariffs for three years. This move aims to protect large numbers of customers from short-term price rises.

Vodafone’s Commitment

Vodafone’s chief executive, Margherita Della Valle, assured that the deal would be “self-funded,” meaning no extra costs from public funding or extra costs for customers. The regulator had previously raised concerns that the deal could drive up people’s bills.

Impact on Competition and Jobs

The CMA concluded that the merger is likely to boost competition in the mobile sector. However, industry analysts have expressed mixed views on the impact of the deal. Kester Mann from CCS Insight described it as a landmark moment, striking a good balance between nurturing competition and encouraging investment. Paolo Pescatore, an industry analyst, warned that it’s still a “waiting game” to assess the full merits of the deal.

Previous Consolidation in the UK Mobile Market

This merger is not the first consolidation in the UK mobile market. In 2010, Orange and T-Mobile merged to create EE, which was later taken over by BT in 2016. In 2021, the CMA approved a £31 billion merger of Virgin Media and O2.

Job Cuts and Customer Concerns

Previous deals have led to job cuts, with EE axing 1,200 roles in the months following the merger of Orange and T-Mobile. The union Unite has warned that this deal could add an extra £300 a year to customers’ bills and lead to up to 1,600 jobs being lost.

Conclusion

The approval of the merger is conditional on several factors. These include:

• Vodafone and Three agreeing to invest billions in the country’s 5G network.

• Capping certain mobile tariffs for three years to protect large numbers of customers from short-term price rises.

Industry analysts have mixed reactions to the merger. Kester Mann, an analyst from CCS Insight, sees it as a landmark moment that balances competition and investment.

However, Paolo Pescatore, another industry analyst, describes it as a “waiting game” in terms of assessing its impact. He notes that it will take many years for the full merits of the deal to be realized and that there are tough decisions ahead.

The union Unite has expressed concerns about job losses, estimating up to 1,600 jobs could be lost due to the merger. The CMA had previously raised concerns that the deal could drive up people’s bills.

The CMA has emphasized its commitment to protecting consumers through legally binding agreements between Vodafone and Three. These commitments include investing in mobile network infrastructure for eight years and capping selected tariffs for three years.

Comparison with Previous Mergers

In 2010, EE was formed through the merger of Orange and T-Mobile, resulting in 1,200 job losses in the months following the deal. An additional 550 jobs were cut the following year. Vodafone and Three claim their merger will create thousands of new jobs, but concerns remain about potential job losses.

Key Statistics

• £16.5 billion: The value of the Vodafone-Three merger

• 27 million customers: The number of customers that will be part of the merged entity

• £31 billion: The value of the Virgin Media-O2 merger approved by the CMA in 2021

• 1,600 jobs: Estimated job losses due to the Vodafone-Three merger

Timeline

• 2010: Orange and T-Mobile merge to form EE

• 2016: BT takes over EE

• 2024: The Vodafone-Three merger is approved by the CMA