After an in-depth investigation by the Competition and Markets Authority (CMA), the regulator has provisionally found numerous concerns regarding telecommunications company Vodafone’s planned merger with competitor Three in the UK.

Led by an independent inquiry group, the investigation has provisionally concluded that the merger would lead to price increases for “tens of millions” of mobile customers, or see customers get a reduced service such as smaller data packages in their contracts.

In particular, the CMA is concerned that higher bills or reduced services would negatively affect customers least able to afford mobile services, as well as those who might have to pay more for improvements in network quality they don’t value.

The merger would also negatively impact wholesale telecoms customers—Mobile Virtual Network Operators (MVNOs), such as LycaMobile, Sky Mobile, and Lebara—which rely on the existing network operators to provide their own mobile services, the CMA has presently found.

With the planned merging reducing the number of network operators in the UK from four to three, the CMA said that it would make it more difficult for MVNOs to secure competitive terms, restricting their ability to offer the best deals to retail customers.

In terms of potential benefits, the CMA found that by integrating the Vodafone and Three networks, the merger could improve the quality of mobile networks and bring forward the development of next-generation 5G networks and services, as claimed by Vodafone and Three.

However, the CMA also said that it currently considers that these claims are overstated, and that the merged firm would not necessarily have the incentive to follow through on its proposed investment programme after the merger.

As a result, the CMA has provisionally concluded that the merger would lead to a substantial lessening of competition in the UK in both the retail and wholesale mobile markets.

Now, the CMA will consult on its findings, and consult on potential solutions to the competition concerns, including the options set out in its newly-published remedies notice.

These include legally-binding investment commitments overseen by the sector regulator, and measures to protect retail customers and customers in the wholesale market. The CMA will retain the option to prohibit the merger should it conclude that other remedy options will not address its competition concerns.

The CMA said that it welcomes responses to its provisional findings by 4 October 2024 and its notice of possible remedies by 27 September, and that these will be considered ahead of its final report which is due by 7 December.

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Commenting, Stuart McIntosh, chair of the inquiry group leading the investigation, said: “We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.

“We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments.”