Unlock Editor’s Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
Britain’s telecoms industry is set to undergo its biggest shake-up in years after the country’s competition regulator on Thursday approved a £16.5bn merger between Vodafone’s domestic operations and CK Hutchison’s Three UK. . The move from four mobile phone carriers to three is a milestone for the sector.
The Competition and Markets Authority announced last year that the two companies could sign binding commitments to invest billions of pounds to roll out an integrated 5G network across the UK and agree short-term customer protections. He said the deal, which was announced for the first time, should be allowed to proceed.
Kester Mann, director of consumer and connectivity at CCS Insight, said: “This mega-merger is one of the most important moments in UK mobile history, creating a new market leader with a combined 29 million customers. It heralds the arrival of the
What remedies have been agreed?
The CMA’s legally binding commitments require joint network upgrades to be carried out over the next eight years. The companies will also cap prices on some cell phone and data plans, and require wholesale services to offer pre-set prices and terms for three years.
Vodafone and Three UK’s £11bn network investment will be overseen by watchdog and UK communications regulator Ofcom.
The CMA’s acceptance of behavioral remedies marked a departure from its previous approach, which required companies to offload assets before a deal was approved.
Michael Grenfell, an antitrust partner at law firm Clifford Chance, said the decision signals “a shift to a more pragmatic approach where necessary” and considering merger and acquisition activity. Businesses are more hopeful about the future and can “be more imaginative and creative with their remedies,” he said. May meet CMA. ”
He added that a “four-for-three” merger of British mobile operators would have been unlikely a few years ago.
Next year, the CMA will consider whether such behavioral remedies should be used more frequently when approving transactions.
Tom Smith, competition lawyer at Gerardine Partners and former CMA legal director, said the situation was “more complex than a blanket softening of the CMA’s position” and that behavioral remedies “are always very rare. ” he said.
What does this merger mean for consumers and competitors?
Consumer organization Which one? said it remains concerned that a merger between two competitors “could lead to higher prices and lower quality for consumers.”
BT had previously expressed opposition to the partnership, but other British mobile phone network operator Virgin Media O2 was more supportive.
Virgin Media O2 (itself formed after a merger in 2021) and Vodafone UK announced in July that they had agreed a new long-term network sharing deal. This has been a concern for the CMA for some time, and Virgin Media says O2 will acquire spectrum from the combined company if approval is granted.
Another legally binding undertaking to which the combined Vodafone trio’s domestic operations are subject is that virtual mobile network providers, which do not have their own network, will be able to achieve a ‘competitive advantage’ as the combined network is rolled out. The goal is to ensure that you can get the right terms and conditions. .
Sky, one of the UK’s biggest MVNOs, said in a supplementary response to the proposed large-scale bailout last month that if the regulator did not make some improvements, it would “consider appealing the decision”. I will have no choice but to do so.” The company declined to provide updates after the decision.
Matthew Howett, founder and chief executive of Assembly Research, said any successful appeal “will be hard fought, expensive and face high hurdles.”
He expects an “overall positive impact” for wholesale customers, consumers and businesses.
What will the company look like after the merger?
Under the terms of the agreement, Vodafone will own 51% of the combined business and CK Hutchison will own 49%. Vodafone has an option to acquire the remaining shares three years after completion if the combined company is valued at £16.5 billion and will do so.
Vodafone UK chief executive Max Taylor, who is also responsible for the new combined business, told the Financial Times: “We will deliver the biggest, fastest and best network the UK has ever seen.” Ta. Three UK chief financial officers (CFOs), Darren Purkiss, will hold the same roles in the combined company.
CCS Insight’s Mr Mann said the combined group’s biggest challenges will be to make “difficult decisions in areas such as brand, retail, employment and market positioning” while making “two established mobile networks and “It’s about combining a complex mix of suppliers.”
Three UK CEO Robert Finnegan acknowledged in a media call on Thursday that there had been “overlapping roles within both companies” but that if a deal with CK had not gone through, He said his group would also have had to cut staff. The Hutchison-owned business had negative cash flow.
He added that the deal is expected to bring new roles across the economy and is “about job creation across the board.”
Will this move be a positive signal for further telecom consolidation in Europe?
The CMA’s decision was closely watched by the industry. The European Commission is also expected to have an impact, said Smith of Geladin Partners.
In 2016, the Brussels regulator blocked CK Hutchison’s attempt to buy O2 from Spain’s Telefonica, citing “strong concerns” that it would lead to higher prices and less choice for British consumers.
Mr Howett said this was one of 10 large-scale domestic telecom ventures undertaken in Europe since 2010. Most were approved, but many were accompanied by structural commitments that “undermine the rationale for the merger.” He added that the continent’s carriers “will have to wait and see” when it comes to reviewing their approach to competition policy, following calls from executives across the sector to allow them to scale up through consolidation. Ta.