It is not a ‘no’, it is not a ‘yes’, but somewhere in between. Just how far along the spectrum between those two binary outcomes will emerge through the coming months. On first glance the Competition and Mergers Authority’s initial findings on the proposed £15 billion merger between the UK businesses of Vodafone and Three look pretty unequivocal.
There will be a significant reduction in competition for Britain’s 90 million mobile subscribers if four become three and prices are likely to go up.
What’s more, the CMA says, it is not good news for what are known as the “virtual” providers, the Skys and the Tescos, who are huge players in their own right in the consumer mobile market, but do not themselves run the towers and other national infrastructure necessary for the 4G and 5G networks to function.
Naturally Vodafone and Three insist that they have no plans to increase prices, oh no not us...blandishments that the CMA are wise to treat with scepticism.
Nevertheless the CMA do seem to accept that without the merger the billions of pounds of investment needed to haul the UK’s 5G performance from close to the bottom of the European league table, to close to the top, will not get made. Or at least not on the scale that is necessary.
The CMA document today rules out a “structural” remedy, such a major disposal by either Vodafone or Three to create a new entrant to get the number of players back up to four, as impractical.
Instead it toys with three potential “behavioural” remedies to ensure the consolidation does not harm the market.
They include a formal investment commitment overseen by a third party monitor; binding commitments on pricing for a set period after the merger; and intervention in the wholesale market to ensure the “virtual” players are not disadvantaged. The most likely outcome is a combination of all three.
Meanwhile Vodafone and Three bosses will be breathing a sign of relief today. Although their public statements are all about disputing the CMA’s findings, privately they will be thinking “it could have been worse.”
The headlines about today’s CMA document will reflect the warning on prices. And rightly so. But the small print does show how a route can be charted through the perfectly reasonable competition concerns and get this merger over the line. The CMA might just be saying “yes, but.”
