UK regulator refers Vodafone's merger with Three for in-depth competition probe

The U.K. competition regulator on Thursday referred the proposed merger between Vodafone and CK Hutchison’s Three mobile network to an in-depth investigation.

The Competition and Markets Authority said, with the information that it currently has, the deal may “be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.”

In late March, the CMA gave Vodafone and CK Hutchison five working days to come up with “meaningful solutions” to the regulator’s concerns or face an in-depth investigation.

The CMA has given itself a deadline of Sept. 18 to complete the in-depth probe, also known as a phase 2 investigation.

Vodafone and Three were not immediately available for comment when contacted by CNBC.

The CMA has previously said the deal could lead to customers facing higher prices and reduced quality, a lessening of competition in the U.K. mobile market. Regulators have argued the transaction could also result in so-called mobile virtual network operators, which rely on Vodafone and Three’s infrastructure, not being able to negotiate good deals for their own users.

The regulator’s process hinges on a decision on whether the deal will lead to a “substantial lessening of competition” (SLC) in the market. The CMA can clear the transaction in the absence of SLC or request remedies from the companies to address its concerns.

Announced last year, Vodafone and CK Hutchison’s transaction would merge the two brands’ U.K. businesses, giving Vodafone a 51% controlling stake and leaving CK Hutchison with the minority interest. 

The combination of Vodafone’s U.K. business and Three UK will reduce the number of mobile operators in the country to just three, following major consolidation in the telecommunications sector in the past few years.

The CMA opened an antitrust probe into the merger in January.