Proactive Investors - Britain’s competition watchdog has raised concerns about Vodafone Group PLC (LON:VOD)'s planned merger with Three.
An investigation by the Competition and Markets Authority concluded that the merger could result in higher prices or reduced services for tens of millions of mobile customers.
The regulator found that customers might have to pay more for improvements in network quality that they do not necessarily value.
Additionally, the merger could negatively impact wholesale telecoms customers, including Lyca Mobile, Sky Mobile and Lebara, which depend on major networks to provide mobile services.
A reduction in the number of network operators from four to three would make it harder for these customers to secure competitive terms, said the CMA.
Stuart McIntosh, chair of the inquiry group leading the investigation, said: “We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.
“We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments.”
In response, Vodafone said the merger “is a once-in-a-generation opportunity to transform UK digital infrastructure with £11bn of investment”.
Vodafone boss Margherita Della Valle stated: "Our merger is a catalyst for change.
“It's time to take off the handbrake on the country's connectivity and build the world-class infrastructure the country deserves. We are offering a self-funded plan to propel economic growth and address the UK's digital divide.
"Great network connectivity is a critical enabler of so many elements of our daily life and is central to the future prospects of so many sectors.
“Businesses large and small are dependent on it and it enables new industries - like AI - to thrive. It facilitates a step change in productivity and care across the public sector, and it lies at the heart of every nation's future prosperity."
The CMA’s final decision is expected on 7 December. Responses to the initial findings are being taken until 4 October.