Mobile Merger: Is Three Enough?

 

Mobile Merger: Is Three Enough?

 

A merger has been announced between Vodafone and the owner of Three UK.

 

The firms plan to merge their UK-based operations.  The transaction would if completed give them around 27 million customers making it the biggest mobile network in the UK behind Virgin Media O2.

 

The transaction has yet to be approved by regulators, and it can be expected that the Competition and Markets Authority will scrutinise it closely.

 

The merger revisits the question of how many mobile operators are needed to maintain competitive markets.  The UK has a history of aggressive mobile competition prompting commentators to speculate that if a four-to-three merger cannot be approved here, then the hopes for similar consolidation in the mobile sector may now be more limited.  There are however already precedents for allowing consolidation from four to three players in other countries, for example the merger between KPN and Telfort in the Netherlands. 

 

The CMA is likely to look at the impact on consumer choice and prices, as well as the implications for development of future infrastructure, including 5G. A further area concerns the impact on mobile virtual network operators, or “MVNOs” to the extent that the transaction would reduce the number of operators effectively willing to host MVNOs on their networks.

 

It’s been argued that the merger would in fact be efficiency-enhancing leading to much needed investment in 5G in the sector.  In the current economic climate, it is perhaps understandable that merging parties would lay claim to such efficiencies to support a more moderated view of a merger between the larger players.  It is also understandable that regulatory authorities will continue to want to be assured that such efficiencies are clearly substantiated by robust economic evidence and argument.