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UK antitrust regulator investigates $19B Vodafone/Three mobile merger

In June, Vodafone and Hutchison-owned Three announced their plan to merge in a non-cash deal to create a $19B mega mobile operator. We predicted a significant regulatory hurdle. The country’s main antitrust regulator, the Competition and Markets Authority, announced an investigation into the deal today.

Today’s announcement invites competitors, companies, and other stakeholders to comment on how this deal will affect competition.

As of this summer’s announcement, Vodafone had nearly 18 million subscribers and Three just over 10 million, making the combined business worth £15 billion (nearly $19 billion at today’s rates). The two companies agreed to give Vodafone 51% and Hutchison 49% of the merged operator.

The CMA has not set dates for phase 1’s official close and the merger inquiry’s formal opening. The 2015 Hutchison, Three’s parent, attempt to buy O2 took years and appears to still be pending.

The tech landscape and startups are affected on multiple levels: The competitive landscape of carriers with which new virtual operators may negotiate bandwidth and other services is reduced.

That could simplify or cost more service deals, but it will make incumbents harder to beat. Those selling consumer-facing OTT apps, adtech, software, or back-end service management tools to carriers will have fewer potential customers. The result will be less competitive choice for consumers.

In a statement, CMA CEO Sarah Cardell said millions of UK consumers and businesses use Vodafone and Three’s mobile networks to stay connected. “We will carefully consider how this deal may affect UK competition, which could affect customer options and prices. We will also examine how it may affect UK mobile network quality investment incentives. This is a chance for merger supporters to voice their opinions before we investigate.

Conversely, telecom unit economics: Three was a new entrant that only emerged with 3G data-based services, hence its name. One of the key points of this merger is that Vodafone is taking on Three’s debt without paying any cash. The companies said the combined entity would help them invest in 5G and build a new mobile and fixed-line network with 82% of households covered by 2030.

The CMA stated that it “cannot consider other potential effects that a merger might have, for example, on employment or access to personal data” by law. Any national security concerns, possibly related to Hutchison’s Hong Kong and Chinese ties, would “be a matter for the UK government, which may choose to intervene under the National Security and Investment Act if it finds concerns.”

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