When Vodafone and Hutchison-owned Three in the U.K. unveiled their plan to merge, creating a colossal $19 billion mobile operator, the regulatory path was expected to be challenging. Today, we enter the next chapter of this story. The Competition and Markets Authority (CMA), the UK's primary antitrust regulator, has initiated steps towards an investigation into the merger.
This move opens the door for comments from competitors, the merging companies, and any other stakeholders with a vested interest in evaluating how this union might impact market competition. These parties have until November 1 to express their perspectives.
As currently proposed, the merged entity would boast approximately 28 million subscribers, blending Vodafone's nearly 18 million and Three's slightly over 10 million. The joint venture would be valued at around £15 billion (nearly $19 billion at today's exchange rates). Vodafone would hold a 51% stake, with Hutchison retaining 49%. This consolidation would reduce the count of major mobile network operators in the country from four to three, alongside O2 and EE.
The CMA has yet to specify commencement dates for the formal investigation's Phase 1, but this will follow the commenting period, marking the next steps in the evaluation process. Investigations of this nature can span months or even years, with cases often persisting through legal proceedings, as observed during Hutchison's 2015 attempt to acquire O2.
The implications for startups and the broader tech landscape are multifaceted: on one hand, it simplifies service negotiations for new virtual operators while potentially raising costs. Competing against established telecom giants becomes more daunting. Companies that cater to carriers will have a reduced customer base, spanning consumer-facing OTT apps, adtech, software providers, and back-end service management tools. Ultimately, consumers may experience fewer choices in a less competitive market.
On the flip side, the deal carries significant financial implications. Three carries substantial debt, while Vodafone takes on that burden as part of the merger. The companies have announced their commitment to invest £11 billion in building new mobile and fixed-line networks, with plans for 82% fiber broadband coverage by 2030.
Notably, the CMA is legally bound to exclude factors such as employment or access to personal data from its evaluation. National security concerns are left to the UK government, which may invoke the National Security and Investment Act if it deems any potential issues warrant intervention.