That this House has considered the proposed merger of Three UK and Vodafone.
It is a pleasure to serve under your chairship, Sir George, and I am grateful for having been granted the debate. I refer the House to my entry to the Register of Members’ Interests. I also welcome my hon. Friend the Member for Rhondda (Sir Chris Bryant) to his new role as shadow Minister.
In July, it was announced that Vodafone and Three UK had agreed to combine their businesses, in an effort, they claim, to create one of Europe’s leading 5G networks. Although I welcome the aspiration, such a deal will have terrible consequences, with higher prices for consumers, job losses alongside inflated corporate profits, and a threat to the UK’s national security. The newly combined company would have 27 million customers, which would make it the largest mobile network operator in the UK, surpassing O2 and EE. That makes today’s debate important, as both carriers already have customers in every one of the 650 seats represented here in the House of Commons.
The announcement of the merger came only months after Vodafone had already announced 11,000 job cuts worldwide, including here in the UK. When Vodafone UK’s chief executive was subsequently asked what impact the merger would have on future job losses, he stubbornly said,
“it’s very early…to talk about job losses”
and that “some roles” might be impacted. External studies suggest that “some” could be as many as 1,600 roles. When Vodafone and Three merged with TPG in Australia in 2020, they claimed that it would accelerate the benefits of substantial network investments made by both companies, when in reality investment levels across the sector are down by 45%.
Is this not part of what we are seeing across the IT sector, which is what we previously saw in other industrial sectors, for example, in companies such as John Rockefeller’s Standard Oil Company? Basically, these companies drive out competition and then set their own terms and the terms of those who work in the industry. Is this not of real concern not just to consumers, but to all those concerned with the creation of those monopolies?
I entirely agree with my right hon. Friend. This merger is bad news not just for UK customers, but for the people who work for both these businesses and, of course, it poses threats to national security as well.
Investment levels in the sector after the merger of Vodafone and Three in Australia went down by 45%. I ask the Minister: does the evidence therefore suggests that this will be a sensible merger here in the UK?
I want to place on the record my thanks to my union, Unite, for campaigning on this issue. It shares the concerns that so many of us have about jobs and national security, and it has consistently kept members aware of the implications since the merger was announced. According to Ofcom, 2.2 million households are struggling with the cost of mobile services. As a report by the House of Commons Library stated:
“Bills for some customers rose by over 11% in 2022. Communications consultancy Farrpoint has estimated that, based on inflation projections, bills will rise by a third over the next five years.”
Will the merger make bills cheaper for British customers? Research suggests not. The former chief competition economist at the European Commission has undertaken work showing that prices after a Three-Vodafone merger could be 50% higher. Based on average spending patterns, that means UK customers would pay up to £300 more per year on their mobile bills.
Only a few months ago, we heard that water companies were pushing for bills to rise by up to 40%. We know that electricity and gas payments almost doubled between May 2020 and June 2023, and the Bank of England chief economist recently warned that food inflation is unlikely to come down soon. Why will British customers who use Vodafone and Three have to find even more money for an unnecessary choice that has been foisted on them?
The merger is bad news not only for households’ financial security, but for the UK’s national security.
I am grateful to the hon. Gentleman for securing this debate. I apologise to all concerned, but I have a meeting in the Treasury very shortly that I will have to go to. However, I want to ask this question to ensure that it is raised with the Minister, who will no doubt be responding to this debate.
On the security issue—as the hon. Gentleman knows, I have been sanctioned by the Chinese Government, like others—I am concerned that there should be full and due diligence on such a merger, particularly given the Cheung Kong Group and the Li family being so knowingly involved with Chinese Government committees, their contacts in the Chinese Government and having to pass data over under the national security law. Will the hon. Gentleman ensure that the key question for the Minister is that the Government are able to assure everybody publicly that this will not take place unless these security issues are clarified and are not still security issues at the end of this process?
The right hon. Gentleman makes important points, and national security is vital. I pay tribute to him for his work on this issue, and to all the members of the Inter-Parliamentary Alliance on China in the House of Commons and the House of Lords who are active in that campaign group.
When there was the issue about Huawei installing its equipment, one of the arguments made was that this was the hardware, and that the telephone companies and indeed the National Security Agency would be able to keep track of the software, but these companies are now deeply involved in the software. Does that not make these systems even more vulnerable to possible influence by the Chinese authorities?
That is an important intervention. I accept the point that the hardware and the software are both quite open to interference, and I hope the Minister will be able to address these concerns from Members.
Following a merger, Three’s ultimate parent company, CK Group, will gain significant control over a business that will serve 40% of the UK’s population. Evidence suggests that there is extensive collaboration between the CK Group, the Li family that controls it and the Chinese state. It is well documented that the Li family has strongly backed pro-Beijing hardliner John Lee as the Chief Executive of Hong Kong, and supported a draconian new security law that would suppress dissent. On top of this, top CK Group executives sit on Chinese Government committees and have access to the inner circle of the Chinese elite. Does the Minister feel comfortable with a hostile foreign actor potentially having access to millions of UK citizens’ data?
Last month, I wrote to Greater Manchester police, my local force, sharing my concerns about the impact that such a merger would have, and Greater Manchester police is just one of the many police forces that have contracts with Vodafone at present. I am aware that Unite the union is happy to provide a list of police forces that have contracts with Vodafone, so I urge Members across the House to contact their local force to seek assurances about security and privacy measures. I implore the Minister to meet Unite to discuss these concerns as a matter of priority.
I have grave concerns that China’s domestic and counter-intelligence laws and Hong Kong’s national security law may pave the way for China’s security services to obtain confidential data from companies such as CK Hutchison. While in theory UK law prohibits the collection or transfer of individual user data, in practice there have been numerous examples in the UK and elsewhere where data has been accessed and transferred to China. Can the Minister give his assurances that he will do all in his power to prevent this from happening?
It is a real pleasure to serve under your chairship this afternoon, Sir George. I thank my hon. Friend the Member for Stockport (Navendu Mishra) for securing this important and timely debate.
The merger of Three UK and Vodafone will create, in the words of Unite the union,
“a telecoms cartel with devastating effects on mobile phone users.”
It is a bad deal for workers, a bad deal for consumers and a bad deal all round. The jobs of 1,600 people hang in the balance, and that is in addition to the brutal 11,000 job cuts globally that Vodafone has recently announced.
Previous telecoms mergers have resulted in workforce reductions of between 7.5% and 12%. While corporations line their pockets, UK workers will be left without the means to support themselves. But don’t take it from me—the former chief executive officer of Vodafone UK, Nick Read, has stated explicitly:
“We feel the UK needs to consolidate to give [us] industrial scale so we can improve returns.”
This dangerous deal will not provide a better service, cheaper costs, more jobs or better terms and conditions for workers. The move is being made solely to line the pockets of these major corporations and their shareholders, and is just another example of the corporate greed we have seen over the last couple of years.
Over 2.2 million UK households are struggling with the cost of mobile services. Three and Vodafone have already rolled out above-inflation price hikes of up to 14% on monthly plans, and research by the chief competition economist at the European Commission shows that prices could increase by an eye-watering 50% following the Three-Vodafone merger. That could mean a £300 hike to UK customers’ phone and broadband bills. Given the looming recession, financial pressures from the cost of living crisis and spiralling inflation in the Tories’ mismanaged economy, this could not come at a worse time.
It is a pleasure, Sir George, to serve under your chairmanship. I congratulate my hon. Friend the Member for Stockport (Navendu Mishra) on securing this important debate. I also draw attention to my entry in the Register of Members’ Financial Interests regarding my membership of Unite the union.
Speaking more than a century ago, Theodore Roosevelt called for congressional action to curb the power and influence of trusts, remarking that
“the state not only has the right to control the great corporations, but is duty bound to control them whenever the need of such control is shown”.
The world has changed beyond recognition since Roosevelt launched his crusade to bust the trusts, but his message—that Governments have a democratic duty to protect their citizens from the aspirations of big businesses to become all-powerful monopolies—is as true now as it was then.
Around the globe, we are witnessing huge corporations’ increasingly aggressive merger and acquisition strategies. It is incumbent upon us to ensure that the interests of our constituents are not trampled over by corporate greed. Should the Three-Vodafone merger succeed, it would create the largest operator in the telecommunications market, with 27 million customers and a 35% market share. It would also reduce the number of mobile network operators in the UK market from four to three.
According to one study, which drew on data from 33 countries over 13 years, 43 telecoms mergers of this kind increased prices by an average of 16.3% per customer. For the average UK customer, that could mean a price hike of between £180 and £300 a year, which is an unaffordable sum for many of the 2.2 million households across the UK that already struggle to meet the costs of mobile services. With more than one in five people in the UK able to access the internet only through their smartphone, this merger also threatens to plunge even more people in Britain into digital poverty, at a time when we need to do more to narrow the digital divide.
It is a pleasure to be called in this debate, Sir George. I thank the hon. Member for Stockport (Navendu Mishra) for introducing the debate and setting the scene, and for his passion for this subject. I also thank the hon. Members who have spoken before me. I will add my support for what they said and also make some other comments.
There is no doubt that this merger could be a major shake-up for many of our constituents who use these services daily and have done so for many years. There has been much discussion about the need for smaller mobile providers and about their place in the mobile network market. There is hope that the merger will allow both Three UK and Vodafone to be a competitor within the market, so it is good to have these opinions on the record, and I very much look forward to hearing what the Minister has to say. May I also say that it is nice to see the shadow Minister, the hon. Member for Rhondda (Sir Chris Bryant), in his place? I only found out today that he has been promoted. I wish him well in his new role, which I know will focus his attention on the subject of this debate. We look forward to hearing his contributions.
I have done some research into this matter—as of course others will have done before coming here. I must say a special thanks to Unite the union, which sent me information that I felt was relevant to put on the record. The hon. Members for Liverpool, Riverside (Kim Johnson) and for Birkenhead (Mick Whitley) have already spoken about that; I will speak about it myself in just a few moments .
According to my research, promises have been made that the combined merger will lead to investment of £6 billion across the UK in its first five years. It has also been said that there will be a best-in-class 5G network. The creation of jobs to support the complete digital transformation of the UK’s businesses has also been mentioned. One big selling point is that under the proposal, the merged company is expected to deliver 5G coverage to nearly 99% of the UK population, which is huge and important.
It is an honour to serve under your chairmanship, Sir George. I thank the hon. Member for Stockport (Navendu Mishra) for securing this important debate. As the hon. Member for Strangford (Jim Shannon) and a couple of other Members did, I would like to thank Unite the union for the incredibly helpful briefings that it produced for this debate. I also welcome the shadow Minister, the hon. Member for Rhondda (Sir Chris Bryant), to his post.
We have been here before. It is only three years since we engaged in a whole pile of debates about Huawei and the threats posed to national security by the involvement of the Chinese state actor with our 5G network. Despite repeated warnings from allies and security experts, the Tories went ahead and awarded Huawei a huge contract to deliver the UK’s 5G network. Only after months of debates, questions and condemnation did they do a final U-turn to revoke the contract, but not before Huawei had begun its work. That meant that not only was a security risk introduced, but the removal of Huawei from the 5G system cost somewhere between £2 and £3.5 billion. The UK Government’s intransigence in the face of those warnings cost taxpayers a huge amount of money.
We should have learned the lesson. However, it now appears that we are getting ready to hand over control of key infrastructure to the CK Group—the parent company of Three. Following the merger, as the hon. Member for Stockport pointed out, the CK Group will become a person of significant control over a business that will serve 40% of the UK’s population. Unite the union has uncovered extensive collaboration between the CK Group, the Li family that controls it and the Chinese state. A number of CK Group executives sit on Chinese Government committees, with access to the inner circle of the Chinese political elite. That has to raise serious questions about privacy and security for UK consumers, which the CK Group has done nothing to address.
Although Ministers may assure us that they will do all in their power, I remain worried that that is not enough to stop sensitive UK Government communications being exposed. It goes beyond the police, as Vodafone has contracts with the Ministry of Justice and the national health service, too. The recent report by the Intelligence and Security Committee of Parliament found that the UK is of “significant interest” to China
“when it comes to espionage and interference”,
and notes that China uses
“all possible legitimate routes to acquire UK technology, Intellectual Property and data”,
but that such overt
“acquisition routes have been welcomed by HMG for economic reasons”.
Now would be a good time for the Government to acquit themselves of that allegation, and to put British consumers and our national security first.
In the past, the Prime Minister met the Intelligence and Security Committee yearly. I hope the Minister will give the House his assurance that the Prime Minister will reinstate those meetings. Now, faced with this significant merger and a litany of other national security threats, would be a good time to do so.
Unite the union has commissioned analysis from digital security expert Dr Alexi Drew, an academic and the director of tech security at consultancy Penumbra Analysis. Dr Drew found that the potential merger created substantial security risks, noting:
“Domestic laws and internal company policies will do little to hinder the exercise of nation-state intelligence gathering apparatus from leveraging any means of access to data that company mergers and acquisitions might enable. If a merger creates the technical or human means to collect valuable data, then the security services of any nation-state, Chinese or otherwise, are likely to make use of it.”
The Government have said that they will assess this risky merger through their investment security unit, so what stage has the ISU assessment reached, and will the acquisition be called in for a further national security assessment? Knowing what we know about the proposals, they seem wrong on so many levels. They are bad news for British customers, will result in significant job losses, and plainly pose a national security threat to the UK. Perhaps things would be very different if the Government actually had an industrial strategy for the UK and were not asleep at the wheel while our national infrastructure got sold off to hostile actors.
In the light of all this, I will be interested to hear the Minister’s contribution and whether he supports the merger. If he supports it, why? If he does not, what will he do to stop the merger?
Vodafone already has a history of hiding profitability to evade taxation, and several countries have condemned it for using tax havens to avoid local fees. Instead of consolidating super-conglomerates, we should be tightening tax loopholes and strengthening the power of regulators to prevent profiteering and protect consumers. Allowing this merger to go ahead would clearly prioritise corporate interests over those of the working class. The Government must act now to end the cycle of greedflation. There are some legitimate security concerns, and I hope the Minister can reassure us that they will be thoroughly explored before any further action is taken. I hope he will agree today to take up the calls to stop this reckless merger.
As we have heard, this merger raises a number of issues for our national security, for our consumer rights and for the futures of thousands of workers who are currently employed by Three and Vodafone. As elected representatives, it is our responsibility to ensure that the proposed deal is subject to robust democratic scrutiny. However, that has become a near-impossible task, because Parliament has been almost totally excised from the scrutiny process. In fact, today’s debate is one of the few opportunities for Members to have a meaningful discussion about the proposed merger. Instead, the responsibility for ruling on whether the merger should proceed has been delegated to the investment security unit, under the direct oversight of the Cabinet Office, and ultimately the Prime Minister himself.
The Intelligence Security Committee has been scathing in its assessment of the process, stating that
“the Government does not want there to be any meaningful scrutiny of sensitive investment deals. Effective Parliamentary oversight is not some kind of ‘optional extra’—it is a vital safeguard in any functioning Parliamentary democracy.”
I hope the Minister will be able to say on what grounds the Government can justify excluding Members from being involved in scrutinising a proposal that has such enormous ramifications for the telecommunications sector.
This merger is a naked attempt to monopolise the telecommunications sector and strangle the opposition, leaving customers with no recourse when prices are inevitably hiked. There is only one right response. The Government should take the lead of the Competition and Markets Authority—which in August confirmed its original decision to block Microsoft’s acquisition of Activision—and kill this deal.
Constituents contact me regularly about rural network coverage—broadband signals or on the phone network. My constituency of Strangford is rural. I live in the country, so I am fully aware of the issues that some families still have with 5G connection. It can go from working in certain areas of the house to not working at all—people tell me about it every week in my constituency. That leads to consumers paying extortionate amounts for wi-fi and not getting the service that they deserve.
We have covered the good news, but let us look at the other side, which the hon. Members for Liverpool, Riverside and for Birkenhead referred to; I think others will refer to it as well, and I want to reiterate that point of view. Unite the union was in touch ahead of this debate to offer insight into the dangers of the merger, and the issues that it could cause. We must look at things from all perspectives and be critical. It is always good to look at an issue holistically—to get all the information in front of us and then make a decision, whether it is right or wrong. I will pose questions to the Minister about our concerns.
It is important that the issues are known and talked about. One that has become increasingly apparent is that the merger raised profound national security concerns. The right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) referred to that, and that is an issue for many of us here. There have been claims of groups connected with Three UK associating with the Chinese state, and aligning themselves with some of the most repressive Chinese policies. That could ultimately mean that the privacy and security of 27 million UK customers is at stake. I have no doubt whatever that the Labour party’s new shadow Minister, the hon. Member for Rhondda, and the shadow Minister from the Scottish National party, the hon. Member for Glasgow North West (Carol Monaghan), will also highlight these issues; that is why the Minister’s response is so important.
We hear of new data breaches and complications, and the misuse of people’s information, almost every day. It never seems to end. We wonder sometimes exactly what is going on. It is of the utmost priority that in a merger, Vodafone and Three UK ensure that their customers’ data is not at risk from anyone or any state—and from China specifically.
The comment has been made that the merger will make mobile bills less affordable. That cannot be ignored. We have already had a couple of years in which price increases have been quite significant, and have hit us all. If the merger closes the market to a number of companies, prices may go up. We make this plea on behalf of customers and our constituents. More than 2.2 million UK households are struggling with the costs of mobile services, due to extreme price increases last year and the year before. We understand fluctuating prices, but we do our best for our constituents to ensure they get the right deals.
That leads me finally to the importance of parliamentary scrutiny—it is why this debate is important, and why the hon. Member for Stockport was right to secure it. This is the place to discuss and highlight issues, and bring them to the attention of the Minister and the Government. We thank the hon. Member for Stockport for doing just that. For all our constituents, whether the merger will impact them or not, the issues, including price hikes, security and convenience, must be spoken about.
To conclude, the merger could have an impact on many aspects of people’s daily lives. It is said that millions of customers could benefit from better 5G coverage. That is the good part, but there is more to it than that. That is what this debate is about. We must ask ourselves what this will cost us and our constituents. There is a cost to security, as well as to our pockets and those of our constituents. I encourage the Minister to think of all those issues, and to do as much as possible to ensure that the merger does not penalise, disadvantage or in any way affect the security of our constituents. Again, I thank the hon. Member for Stockport and say, “Well done.”
Under the Chinese Government’s state security laws, it would be possible for the personal data of all users of the new merged company to end up in the hands of the Chinese Government. That is bad enough, but Vodafone holds UK Government contracts for the NHS 111 helpline, the Ministry of Justice and the Ministry of Defence.