The UK competition watchdog on Friday said it was launching a phase one investigation looking into the merger of Three UK and Vodafone Group PLC’s UK businesses.
The UK Competition & Markets Authority (CMA) said it will be looking at whether the proposed deal could damage competition for consumers and businesses.
“This deal would bring together two of the major players in the UK telecommunications market, which is critical to millions of everyday customers, businesses and the wider economy,” CMA chief executive Sarah Cardell said.
Vodafone shares were up 1.3% at 68.98p each in London on Friday afternoon.
“The CMA will assess how this tie-up between rival networks could impact competition before deciding next steps.”
The CMA now has up to 40 working days to assess the deal, and decide whether a more in-depth phase two investigation is required.
Three UK is owned by CK Hutchison Group Telecom Holdings, a Hong Kong-based telecommunications, ports, infrastructure and retailing conglomerate. Vodafone is based in Newbury, Berkshire, and operates across 17 countries.
CK Hutchinson and Vodafone unveiled plans to combine their UK businesses last June, with Vodafone to own 51% and CK Hutchison 49% of the combined operation.
This prompted the CMA to invite comments on the proposed deal in October, as it considered whether the tie-up could result in a substantial lessening of competition in UK markets for goods and services.
Under the terms of the proposed deal, neither company will pay cash for the merger. Instead, they will take on debt. Vodafone will take on £4.3 billion and Three UK £1.7 billion.
Back in June, Vodafone said the merger in the UK would create the best 5G network in Europe and around £5 billion per year in economic benefit by 2030, with every UK school and hospital having access to standalone 5G by then.
Further, Vodafone had anticipated more than £700 million of annual cost and capital expenditure synergies by the fifth full year post-completion. It had expected the deal to close before the end of 2024.
The news of the investigation comes at a sensitive time for Vodafone. On Wednesday, deputy prime minister Oliver Dowden declared there were “national security risks” from a UAE firm being the major shareholder in the telecommunications firm.
Emirates Telecommunications Group Co’s strategic relationship with Vodafone could allow it “materially influence” the policy of Vodafone, he said.
He explained this would pose a threat to national security due to Vodafone’s role in supporting the UK government’s domestic and international telecommunications initiatives, contributing towards ensuring UK cyber security, and acting as a strategic supplier to many parts of the UK’s central government.
By Elizabeth Winter, Alliance News deputy news editor
