By Sarah Young
LONDON (Reuters) -A planned merger between Vodafone (LON:VOD)'s UK operation and Hutchison's Three UK unit is likely to face a 24-week in-depth investigation after Britain's antitrust regulator said on Friday the tie-up risked leaving consumers worse off.
The $19 billion deal was announced last year, and if it proceeds, would reduce the number of mobile networks in Britain from four to three. It would therefore be expected to require an in-depth investigation on the basis of the long-held tenet that at least four networks are required to keep prices low.
The Competition and Markets Authority (CMA) on Friday gave the two companies five working days to respond with "meaningful solutions" to its concerns that the merger will result in higher prices for consumers and businesses, and lower investment.
Vodafone UK and Three UK said in a joint statement the CMA's intention to move the deal to an in-depth investigation was in line with the time frame for completion they set out when the deal was announced in June.
"Vodafone UK and Three UK remain confident that the transaction will deliver significant benefits for competition, customers and the country," they said on Friday in their initial response to the CMA's statement.
Given the complex nature of the deal, with no clear cut divestments available to address competition concerns, it was unlikely that the companies would be able to offer solutions within the five-day window, lawyer Tom Smith at Geradin Partners said.
"It's really not a plausible outcome," he said.
The 24 week in-depth study can be extended by eight-weeks in certain circumstances.
The CMA's statement said competitive pressure was needed to help keep prices low and spur investment.
"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," Julie Bon, the regulator's Phase 1 decision-maker said.
"These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions."
As part of the deal, the two companies pledged to spend 11 billion pounds ($13.87 billion) on 5G networks, in keeping with the government's stated aim to improve Britain's communications.
($1 = 0.7930 pounds)