Higher prices fear over merger of mobile giants

THE proposed merger between mobile networks Vodafone and Three could lead to “higher prices” and “reduced quality” for customers, the competition watchdog has warned.

The Competition and Markets Authority said the deal will face an in-depth investigation unless both companies can soon address their concerns.

Vodafone and Three first announced the £15 billion merger last summer. It would create the UK’s largest mobile phone network.

The two mobile firms have argued the deal will allow them to increase investment and better compete with major rivals EE operator BT and Virgin Media-O2.

However, the authority launched an initial phase one investigation into the move in January and said this morning it had concerns over the impact of two of the country’s four largest mobile firms merging. It is “concerned the deal... could lead to mobile customers facing higher prices and reduced quality”.

The regulator said it found in its initial probe that the two companies were important alternatives for mobile customers and combining these two businesses will reduce rivalry between mobile operators.

Julie Bon, phase 1 decision-maker for this case at the CMA, said: “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.

“Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in UK mobile networks. These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”

The watchdog also raised concerns that the deal “may make it difficult” for smaller mobile operators such Sky Mobile, Lebara and Lyca Mobile to negotiate good deals for their own customers, by reducing the number of mobile network operators who will host them.

Vodafone and Three have said they will review the CMA’s concerns and will “engage constructively” with the regulator.