Britain’s competition regulator on Thursday approved the merger between telecommunication firms Vodafone and Three in the U.K., subject to certain conditions.
The Competition and Markets Authority (CMA) said the £15 billion ($19 billion) tie-up should be allowed to proceed if both companies sign “binding commitments to invest billions” to roll out a combined 5G network across the U.K.
The combined entity would also be required to cap certain mobile tariffs and “offer preset contractual terms” to so-called mobile virtual network operators (MVNOs) — mobile operators that piggyback off of another company’s network.
Vodafone and CK Hutchison, the owner of the Three U.K. network, announced the transaction last year. The deal, now approved, will merge the two brands’ U.K. businesses, giving Vodafone a 51% controlling stake and leaving CK Hutchison with the minority interest.
“This mega-merger marks one of the most significant moments in the history of UK mobile, heralding the arrival of a new market leader with a combined 29 million customers,” Kester Mann, director of consumer and connectivity at CCS Insight, said in a note on Thursday.
“The outcome – after months of intense regulatory scrutiny – is about as good as it could have got for Vodafone and Three. Not only did they secure approval, but the agreed remedies and commitments are less onerous than feared.”
The CMA’s decision comes after it opened an antitrust probe in to the deal in January and announced an in-depth investigation in April. Last month, the competition watchdog laid out a path for the deal to move forward, if certain remedies were adopted.
The regulator was concerned that the merger, which will trim the number of major telecommunications network players from four to three, would lead to higher prices or reduced services.
Vodafone said the deal is expected to be formally completed in the first half of 2025.
“Today’s decision creates a new force in the UK’s telecoms market and unlocks the investment needed to build the network infrastructure the country deserves,” Vodafone CEO Margherita Della Valle said in a press release.
CMA requires commitments
The legally binding commitments require Vodafone and Three to create their 5G network over the next eight years.
Vodafone has previously said the combined entity would invest £11 billion into U.K. telecommunications infrastructure.
The new company will also need to cap certain mobile tariffs and data plans for three years, as well as offer pre-set prices and contract terms for wholesale services for MVNOs.
These conditions will be overseen by the CMA and the communications regulator Ofcom.
“Having carefully considered the evidence, as well as the extensive feedback we have received, 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,” Stuart McIntosh, chair of the independent inquiry group leading the investigation at the CMA said in a press release.
Paolo Pescatore, founder of PP Foresight, said it will take a while before the benefits of the deal are seen.
“A decision may have been made today but it’s still a waiting game. The bottom line is it will take many years before the full merits of the deal are realised, and there’s a lot of tough decisions to come,” Pescatore said.