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(Alliance News) - The UK Competition & Markets authority on Friday said a planned merger between Vodafone UK and Three UK could raise consumer prices and harm investment into UK mobile networks.
Vodafone UK is owned by Berkshire, England-based telecommunications provider Vodafone Group PLC, and Three UK is owned by Hong Kong-based telecommunications, ports, infrastructure and retail conglomerate CK Hutchison Holdings Ltd.
Both are major providers of mobile telecommunication services in the UK, and two of only four UK mobile network operators, the others being BT/EE and Virgin Media O2.
Vodafone and CK Hutchison announced plans in June to combine the UK businesses into a joint venture, with Vodafone to own 51% and CK Hutchison 49% of the combined operation. This would bring their 27 million customers under a new, single network provider.
The CMA, which launched its phase 1 investigation in January, said on Friday that the probe "has highlighted competition concerns", and that the deal "could lead to mobile customers facing higher prices and reduced quality".
Additionally, the regulator said the merger could lead to lower investment in UK mobile networks.
The CMA explained that Vodafone UK and Three UK "provide important alternatives for mobile customers", and noted that Three UK is "generally the cheapest of the four mobile network operators".
"The CMA is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers," the regulator explained. "Competitive pressure can help to keep prices low, as well as provide an important incentive for network operators to improve their services, including by investing in network quality."
The deal could also reduce the number of mobile network operators capable of hosting 'virtual' mobile networks, thereby making it harder for smaller operators such as Lyca Mobile, Lebara and Sky Mobile "to negotiate good deals for their own customers".
The CMA's Julie Bon, who decided on the case, commented: "Millions of people in the UK depend on effective competition in the mobile market in order to access the best deals for them.
"Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims."
Vodafone UK and Three UK have five working days "to respond with meaningful solutions", the CMA said, otherwise it will subject the merger to an in-depth phase 2 investigation.
Despite the regulator's scrutiny, shares in Vodafone rose 2.3% to 69.06 pence on Friday morning in London.
By Emma Curzon, Alliance News reporter
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