Vodafone threatens to cut investment if Three merger blocked

Vodafone CEO Ahmed Essam has issued a warning regarding the potential consequences of the Competition and Markets Authority (CMA) impeding the proposed merger between Vodafone and Three, report The Times.

Essam highlighted the essential nature of the merger in relation to the UK’s digital infrastructure and the government’s 5G rollout targets. Essam said that without the merger, Vodafone’s ability to invest and deliver on the wireless infrastructure strategy’s 5G ambitions would be significantly hampered.

The Wireless Infrastructure Strategy, released by the UK government in April, outlines a comprehensive plan to establish world-class digital infrastructure across the entire country. Its primary objective is to ensure nationwide coverage of standalone 5G technology to all populated areas by 2030.

Vodafone and Three recently formalised a merger agreement worth £15 billion. Under the agreement, Vodafone will hold a majority stake of 51%, while Three UK’s parent company, CK Hutchison, will own the remaining 49%. Notably, the merger does not involve any cash exchange.

Upon approval, the merged entity will become the largest mobile network operator in the UK, surpassing both Virgin Media O2 and EE, boasting a customer base exceeding 27 million.

The agreement commits Vodafone and Three to invest a substantial £11 billion in UK mobile infrastructure. This investment includes ambitious plans to achieve 99% coverage of the UK with their advanced 5G standalone network by 2034, as well as offering fixed wireless access to 82% of UK households by 2030.

Margherita Della Valle, Vodafone Group Chief Executive, highlighted the positive impact of the merger, emphasizing that the creation of a sustainable and competitive third operator, along with the £11 billion investment plan, will drive growth, employment, and innovation within the UK. Robert Finnegan, CEO of Three UK, added that the merger will facilitate the widespread adoption of 5G, supporting the government’s objectives for digital and economic growth.

However, critics of the merger have voiced concerns regarding potential monopolistic effects. They argue that the merger could result in higher prices for consumers and job cuts within the industry. Citing the example of the Vodafone Hutchison merger with TPG in Australia in 2020, research from trade union Unite suggests that such consolidations can lead to increased prices for customers and reduced investment in the sector.

Consequently, the CMA and other regulatory bodies are expected to approach the merger with caution. They are likely to impose stringent conditions on the merger before granting approval, aiming to safeguard fair competition and prevent any negative impact on the market. These conditions may include price controls over a defined period or requirements to divest spectrum holdings, ensuring a level playing field for all market participants.