Watchdog approves £15bn Vodafone-Three UK deal regardless of greater payments fears

Britain’s competition regulator has approved the £15billion merger of Three UK and Vodafone, clearing the way for the creation of the country’s biggest mobile operator.

The Competition and Markets Authority said on Thursday the deal can proceed if the two firms agree to spend billions rolling out a combined 5G network across the UK.

Vodafone and Three UK, whose parent company is Hong Kong-based CK Hutchison, have pledged to invest £11billion creating such a network over the next decade.

The pair have already promised to cap their lowest-cost mobile plans at £10 for two years after the CMA raised concerns that the tie-up would lead to higher bills for millions of mobile users.

First announced in June 2023, the merger will create the UK’s largest mobile operator, with around 27 million customers, and cut the number of operators from four to three.

Vodafone will hold a 51 per cent stake in the enlarged business but have an option to buy CK Hutchison Group’s 49 per cent stake three years after the deal is finalised, depending on certain conditions. 

Thumbs up: The Competition and Markets Authority has approved the proposed £15billion merger between Vodafone and Three UK 

The two firms believe their consolidation will provide customers with a better 5G service, up to £5billion in economic benefits annually to the country by 2030, and advance the UK’s digital transformation.

Stuart McIntosh, chair of the watchdog’s probe into the tie-up, said: ‘It’s crucial this merger doesn’t harm competition, which is why we’ve spent time considering how it could impact the telecoms market.

‘We believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed – but only if Vodafone and Three agree to implement our proposed measures.’

Following the deal’s completion, expected in the first half of 2025, the two groups must cap selected mobile tariffs and data plans and offer pre-set prices and contract terms for wholesale services for three years.

The tie-up comes amidst other transformative efforts under Vodafone’s chief executive, Margherita Della Valle, who is looking to reduce the firm’s massive debt pile and streamline operations.

Since she took over, Vodafone has sold its Spanish and Italian businesses in billion-pound deals, as well as its stake in telecoms infrastructure company Indus Towers, and unveiled plans to slash over 11,000 jobs over three years.

In its latest half-year results, the company reported its service revenues rose by 1.7 per cent to €15.1billion in the six months ending September.

Combined with lower energy costs across Europe, this helped its adjusted earnings before nasties expand by 3.8 per cent to €5.4billion.

Vodafone’s Della Valle said the CMA decision ‘creates a new force in the UK’s telecoms market and unlocks the investment needed to build the network infrastructure the country deserves’.

She added: ‘Consumers and businesses will enjoy wider coverage, faster speeds and better-quality connections across the UK, as we build the biggest and best network in our home market.’

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: ‘A streamlined three-player market, seen in countries like the Netherlands and Switzerland, could lift profitability and encourage much-needed investment in the UK’s lagging networks.

‘This is a small win for the sector but doesn’t change the tough market dynamics.’

Vodafone shares were 0.7 per cent up at 70.3p on Thursday morning, although they have barely risen since the year began.