Proposed merger between Three UK and Vodafone

This briefing has been superseded by the Commons Library briefing for the General debate on the potential merger of Three UK and Vodafone (13 December 2023). Mobile Network Operators

Mobile networks (including masts, antenna, and so on) are built by telecoms companies called mobile network operators (MNOs). Since 2010, when T-Mobile and Orange merged to become EE, there have been four MNOs in the UK. They are: Vodafone, Three, O2, and EE.

Each of the MNOs offers mobile services to customers. MNOs also act as wholesalers, selling network access to other telecoms companies who do not have their own network infrastructure. These companies, called mobile virtual network operators (MVNOs), use MNOs’ networks to provide services to customers. MVNOs include Tesco Mobile and GiffGaff.

Views on mobile market consolidation

The proposed merger between Vodafone and Three would create an MNO of comparable size to O2 and EE. According to the press release announcing the deal, the merged company would be able to increase investment in mobile networks and be better able to compete for retail and wholesale customers. They say that the deal is therefore good for competition.

Others, including Unite the Union, have argued that the merger could lead to job losses and higher prices for consumers.

The government and Ofcom have said that the impact of any proposed MNO consolidation on the market will be highly context specific and will be assessed on a case-by-case basis.

UK competition regime

Competition law seeks to curb practices that undermine or restrict competition to the detriment of consumers. This includes the abuse of a dominant market position by a firm, anti-competitive agreements between firms, and mergers or takeovers which, if allowed, would result in a substantial lessening of competition.

In the UK, primary responsibility for enforcing competition law lies with the independent competition authority, the Competition & Markets Authority (CMA).

There is further detail in the Library briefing on the UK competition regime.

The role of the Competition and Markets Authority in mergers

Vodafone announced that its merger with Three would be subject to clearance from the CMA and it has been reported that the CMA has confirmed it will examine the merger. Completion of the Transaction is expected to occur before the end of 2024, subject to regulatory and shareholder approvals.

National Security and Investment Act 2021

Navendu Mishra MP who called the debate has raised concerns around national security stating that the merger:

could pose a national security risk by giving a company whose controlling family collaborates with the Chinese state an even more influential role at the heart of our sensitive telecoms infrastructure.

Three is owned by CK Hutchinson Holdings Limited which is listed on the Hong Kong Stock Exchange.

In June 2023, a Vodafone press release said that after the merger, Vodafone would own 51% and CK Hutchinson Holdings Limited would own 49%. The press release said that the transaction would be subject to approval under the National Security and Investment Act.

The National Security and Investment Act 2021 introduced a regime for reviewing and intervening in business transactions which might raise national security concerns. The list of industries covered as notifiable acquisitions under the Act includes communications.