Vodafone and Three have struck a deal to merge their UK operations, creating the UK’s largest mobile network with a combined customer base of 27 million.

Three is a unit of CK Hutchison, a Hong Kong based company, which would own 49% of the new company, while Vodafone would take the majority stake of 51%.

The deal would leave only three mobile networks available in the UK, and mean all three would be combined networks.

Virgin Media and O2 have 24 million customers, while EE/BT has 20 million users.

The Competition and Markets Authority (CMA) is set to investigate the merger to see if it will remove market competition and make it more harmful to consumers.

The CMA said, as reported by the BBC: “Both Vodafone and Three are key players in the UK communications market – with millions of consumers and many businesses relying on their services – so it’s right that the CMA reviews the impact this deal could have on competition.”

While Vodafone has insisted their case for the merger is strong, Three UK was blocked during talks to merge with O2 by EU regulators prior to Brexit.

Olexandr Kyrychenko, Partner at IMD Corporate, commented: “In assessing this question, the CMA will not merely look to whether there will be more pressure on rivals or whether there may be less choice of stand-alone providers available to consumers. Matters such as innovation and proposed investment into 5G infrastructure will also be relevant when assessing whether SLC has arisen. It is not uncommon for CMA to give conditional approval.”

The companies said the merger would “create a third operator with scale, levelling the competitive playing field, increasing competition to the UK’s two leading converged operators and will also provide more choice in wholesale partners for the UK’s already competitive MVNOs (Mobile Virtual Network Operator).”

Margherita Della Valle, Vodafone Group Chief Executive, described the merger of Vodafone UK and Three UK as being “great for customers, great for the country and great for competition.”

The merger may indeed improve network quality for consumers: GWS recently analysed performance among the five UK networks, with combined networks outperforming Vodafone and Three UK on their own.

Dr. Paul Carter, CEO of mobile benchmarking and intelligence provider GWS, commented: “In terms of what’s in it for consumers, our latest test results show Vodafone and Three were both lagging in terms internet performance between broadband and mobile services. Virgin Media O2 are currently leading the way in terms of the overall combined connectivity consumers experience, with EE/BT just behind.

“On paper this merger makes sense for two companies looking to close the gap on competitors who have themselves benefited from combining their connectivity offerings.

“However, it remains to be seen whether it will bring success. Three and Vodafone bring together a set of competing mobile assets to bring down costs. Yet, previous mergers in this area were more complementary in terms of filling technological gaps in wireless services, mobile and broadband.”

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Canning Fok, Group Co-Managing Director of CK Hutchison, said: “Together, we will have the scale needed to deliver a best-in-class 5G network for the UK, transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the UK. This will unlock significant value for CK Hutchison and its shareholders, realise material synergies, reduce net financial indebtedness and further strengthen its financial profile.”

To placate regulator concerns, the companies are investing £11 billion over the next ten years to create an advanced standalone 5G network.

In a statement, the companies also promised that the merger will deliver up to £5 billion per year in economic benefit by 2023.

Ahmed Essam, Vodafone UK Chief Executive, said: “Through converged offers we will really challenge the two largest operators and, of course, we will continue to support the most vulnerable in society with our social tariffs and our commitment to help 6 million people cross the digital divide by 2025.”

Consumer groups are concerned that the move may remove competition and potentially hurt consumer interests.

Rocio Concha, Which? Director of Policy and Advocacy, said: “A good mobile connection is essential to everyday modern life and this merger between Vodafone and Three will have a significant impact on the telecoms market.

“There are currently four mobile network operators in the UK – EE, O2, Three and Vodafone – which smaller mobile providers then piggyback off. Reducing the number of network providers from four to three risks reducing the choices available to consumers, raising prices and lowering the quality of services available.

“The CMA needs to conduct a thorough assessment to determine whether this merger will be harmful to consumers.”