The Vodafone and Three UK merger has been conditionally approved by the Competition and Markets Authority (CMA).
The £15 billion deal has been given the go-ahead, provided both companies agree to invest billions in the country's 5G network, and also cap certain mobile tariffs and data for at least three years to protect customers against "short-term" price rises.
The CMA had previously raised concerns that the Vodafone and Three merger could drive up customer's bills and result in less advantageous terms for virtual network providers.
But in its final decision, published today, the CMA has confirmed it is now satisfied that the proposed network commitment, supported by shorter term protections for both retail and wholesale customers, have resolved its competition concerns.
Stuart McIntosh, who led the watchdog's probe into the deal, said it would "likely to boost competition" in the mobile sector and should be allowed to proceed - but only if the firms agree to the measures.
Vodafone and Three have committed to invest £11 billion to create an advanced 5G network. They said that new network will reach 99 per cent of the population and benefit more than 50 million customers, through significantly better quality, greater reliability and enhanced capacity for handling ever-increasing data demand.
The CMA has allowed the merger to proceed, subject to the following legally binding commitments being met, as overseen by Ofcom and the CMA:
• Delivery of the joint network plan, which sets out the network upgrade, integration and improvements Vodafone and Three will make to their combined network across the UK over the next eight years. The CMA has concluded that by significantly improving the quality of the combined network, the full implementation of this plan would boost competition between the mobile network operators in the long term, benefiting millions of people who rely on mobile services.
• Capping selected mobile tariffs and data plans for three years, directly protecting large numbers of Vodafone/Three customers from short-term price rises in the early years of the network plan.
• Offering pre-set prices and contract terms for wholesale services (again for three years) to ensure that virtual network providers can obtain competitive terms and conditions as the network plan is rolled out.
Vodafone and Three have previously claimed that the merger will create thousands of new jobs.
But the union Unite has warned that the deal could add an extra £300 a year to customers’ bills and result in "up to 1,600 jobs" being lost.
Vodafone’s chief executive, Margherita Della Valle, said, “Today’s decision creates a new force in the UK’s telecoms market and unlocks the investment needed to build the network infrastructure the country deserves.
“Consumers and businesses will enjoy wider coverage, faster speeds and better-quality connections across the UK, as we build the biggest and best network in our home market.
“Today’s approval releases the handbrake on the UK’s telecoms industry, and the increased investment will power the UK to the forefront of European telecommunications.”
Canning Fok, deputy chairman of CK Hutchison and chairman of CK Hutchison Group Telecom Holdings, which owns Three, said, “We have been operating telecoms businesses in the UK for over three decades and Three UK for the past two. We have invested in the people and the infrastructure, helping to bring the benefits of mobile connectivity to UK businesses and consumers.
“When Three and Vodafone are combined, CK Hutchison will fully support the merged business in implementing its network investment plan, the cornerstone of today’s approval by the CMA, transforming the UK’s digital infrastructure and ensuring customers across the country benefit from world-beating network quality.”
Simon Frumkin, CEO of Freshwave, said, "The last telecoms merger in the UK led to a lot of investment and innovation, resulting in us being the first European country to launch 4G. Since then, because of the competitive nature of the global ecosystem, the UK has started to fall behind other markets when it comes to network infrastructure deployment and overall quality of service.
“Meanwhile, BT and EE have maintained a leading network quality score akin to those in first class mobile connectivity markets (specifically a score of over 900 in the recent Global Umlaut PBM scoring system). The UK needs all of our network operators to be world class to maintain our competitiveness as a nation and this merger makes that possible."
Vodafone and Three said that they will study the final report in detail and will continue to engage with the CMA as they put in place the final undertakings.
The merger is expected to formally complete during the first half of 2025. Vodafone will own 51 per cent of the equity and, after three years following completion and subject to certain conditions, Vodafone may acquire Hutchison’s 49 per cent stake through a put and call option.