UK launches antitrust probe into planned $19B Vodafone/Three merger

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The UK's Competition and Markets Authority (CMA) is launching a formal investigation into the proposed merger between Vodafone and Three UK.

The news hardly comes as a surprise, given that the £15 billion ($19 billion) joint venture will reduce the number of UK core infrastructure-owned mobile networks from four to three (the other two are EE and O2 ), and the pair had already given permission for the deal to be completed by the end of 2024. That was almost 18 months ago when he first revealed his plans in June.

“This deal will bring together two major players in the UK telecommunications market, which is vital to millions of everyday customers, businesses and the wider economy,” Sarah Cardell, chief executive of the CMA, said in a statement. “The CMA will assess how this alliance between rival networks could affect competition before deciding on next steps.”

phase 1

Today's news signals the beginning of what is known as a “Phase 1” investigation, which will involve assessing whether the proposed merger would lead to a “substantial lessening of competition”, while assessing whether the parties involved, competitors, Important data will be collected from customers and others. Stakeholders. This initial market analysis phase could take up to 40 days, after which the deal could proceed to a more in-depth “Phase 2” investigation that could last for a further six months – so Vodafone and Three have given themselves until 2024. Why was permission given? Will the deal be given the green signal?

“It was certain that the CMA would launch a formal investigation – it was also certain to proceed to a full Phase 2 investigation,” former CMA legal director Tom Smith, now a partner at London-based law firm Geradin Partners, explained to TechCrunch. . , “This means we should expect a final decision from the CMA in the autumn.”

Three is actually embroiled in a previous failed takeover attempt, when its parent company Hutchison tried to buy O2 in a £10.25bn deal – this was rejected by EU regulators, although the deal could be renegotiated in 2022 The issue came to light when a European court advisor suggested that the original court's decision should be overruled. It's not entirely clear how this might affect this latest merger attempt, but Smith believes the deal is almost done, no matter what any court later concludes.

“The previous Three/O2 merger is still technically going through the EU courts, but in reality that deal fell through a long time ago,” Smith said. “The current deal will in any case be reviewed on its own merits.”

With the potential outcome of a full Phase 2 merger investigation, the onus will be on Vodafone and Three to convince the CMA that the benefits outweigh less competition.

“We strongly believe that the proposed merger of Vodafone and Three will allow us to better compete with the two larger players by creating a combined business with greater resources to invest in infrastructure,” Vodafone UK CEO Ahmed Essam said in a statement. “Competition will increase significantly.” “Our commitment to invest £11 billion will build capacity to meet the rapid growth in data demand and accelerate the implementation of advanced 5G across the UK, delivering benefits to consumers and businesses across the country.”

National Security

It's worth noting that there is actually an additional regulatory aspect to this deal beyond competition concerns. On Wednesday, the UK Cabinet Office said its 14.6 percent stake in the United Arab Emirates (UAE) telecoms group called E&Vodafone could pose a threat to national security, and a security detail was set up at Vodafone to monitor sensitive operations. Ordered to form a committee. “Vodafone and its group conduct conduct that has an impact on or is in relation to the national security of the United Kingdom.”

Meanwhile, Three is owned by Hong Kong-based conglomerate CK Hutchison Holdings, which is subject to a national security law introduced by China in 2020.

“It has been clear for some time that the proposed merger will also have an additional regulatory dimension under the National Security and Investment Act, including Three's links with China through its ownership of Hong Kong and the impact of China's national security law in Hong Kong ” Alex Haffner, competition partner at UK law firm Fladgate, said in a statement. “This is compounded by UAE company E&C's recent acquisition of a 14.6% stake in Vodafone, which has already been subject to a security review by the UK Government under the Act, meaning the parties to the merger will now have to complete the deal. “Will face high-level government as well as regulatory scrutiny.”