The UK Competition and Markets Authority (CMA) has raised a flag over the merger of two major mobile networks Vodafone and Three in addition what looks to be a significant one. The UK regulator has warned that were the merger to go ahead, it would lead to higher prices for consumers and see competition in what is an already concentrated market “diminished”. Vodafone and a subsidiary of Chinese network provider Hutchison 3G agreed in June to spin off the UK’s fourth-largest mobile operator into this joint venture — under the condition that remedial talks between the two operators concluded without result as planned, thus hopefully counter-balancing ‘peak time’ calls on their networks.
This would give the new company close to 40 per cent share of the UK mobile market, likely to set alarm bells ringing with regulators and consumer rights campaigners. The merger of both businesses will create a superior player for the combined business, and the two companies have said this is an essential step to take in increasing infrastructure investment, speeding up 5G rollout and will also strengthen service coverage across the UK. They counter that combining them will result in a more efficient, competitive global operator, allowing for better service and network experience.
That said, the CMA’s resulted findings appear to be that while a merger may boost mobile networks services but they will come at too high a price. But the real issue is fewer competitors in the UK telecom sector. Without so many big players in the market, the CMA is concerned that prices could go up due to fewer competitors meaning there is “less competitive pressure on pricing”, and the combined company might put their prices up knowing they won’t have much competition. It added that smaller telecoms companies not using Vodafone and Three’s network infrastructure, could see their costs rise. And if wholesale pricing goes upward, these kind of little individuals could well transfer their receive expenses to be able to consumers, soaring mobile phone bills over all. Effects on Consumers The merger of Vodafone and Three would have a massive impact on UK mobile consumers.
Mobile users and business customers could lose out though, as the CMA’s report notes that consumers might end up paying increased prices for their mobile contracts, have less choice in the long run, and potentially be offered fewer innovative options. On the customer service side what could morph into longer customer response times from providers in a non-competitive market. And with their hands on an impressive portion of the mobile spectrum, this duopoly is set to constrain development for new or smaller companies trying to play in this space, now and going into the future. Industry reaction Vodafone and 3 were quick to defend the merger, reiterating that their aim is to deliver stronger services for UK consumers. They say it will increase investment in network infrastructure, helping provide faster and more stable 5G coverage for generations of technological advancement well into the future, from basic mobile connectivity in everyday life to emerging facets like new smart cities or autonomous vehicles. Companies insist that merging will allow them to better fend off bigger hackers, and foreign telecoms giants, but for our benefit: by keeping their pricing competitive (such things are what the companies need to do in order to appease investors who don’t want every merger tied to a price hike; if anything should be bad it is the small amount of money pocketed already). What’s Next?
We 😮 will order the CMA to conduct further inquiries before it heads for a final decision. In keeping with that, the agency said it will solicit more information from other members of industry, consumer groups and the public. If it sees negative effects coming, then the merger might be subject to certain limits or conditions designed to protect consumers, including price caps or required levels of competition. The UK telecom sector tipping point Proponents in favor of the Vodafone-Three merger say it is required if investment and innovation are to continue, but today’s CMA warning indicates that such a step could actually be detrimental for consumers through increased prices and reduced competition. With this mega merger in the pipeline, we can expect a great deal of debate on both sides over what it could mean for the UK’s digital future — and whether allowing its to proceed will be worth these heightened costs.
