Vodafone, Three UK merger faces extended probe over competition fears

CMA launches in-depth investigation into £15bn telecoms deal.

Vodafone, Three UK merger faces extended probe over competition fears
Vodafone VOD

The £15 billion merger between Vodafone (LSE: VOD) and Three UK has hit a roadblock as Britain's competition watchdog raised significant concerns, prompting an extended phase two probe.

The Competition and Markets Authority (CMA) fears the tie-up of the UK's second and fourth-largest mobile operators could substantially reduce competition, leading to higher prices and lower quality for consumers and businesses.

In its initial phase one investigation, the CMA found Vodafone and Three UK are "important alternatives" for customers, having made substantial investments in 5G networks in recent years. Notably, Three is "generally the cheapest" of the four major providers.

"The CMA is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers," the regulator stated, adding competitive pressure keeps prices low and incentivizes investment in network quality.

The companies now have five working days to propose "meaningful solutions" to alleviate the CMA's competition concerns. Vodafone CEO Margherita Della Valle had previously claimed the deal would benefit customers and competition.

Despite the regulatory scrutiny, Vodafone shares rose 2% on Friday morning.

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