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CMA launches inquiry into Vodafone / Three merger

06 February 2024

The Competition and Markets Authority has announced the launch of its merger inquiry into the proposed merger of mobile network operators Vodafone and Three, and is inviting views on how the merger could affect competition.


Vodafone UK ("Vodafone") and Three UK ("Three") announced in June 2023 their joint venture agreement in relation to their UK telecommunication businesses. Vodafone and Three comprise two of four total mobile network operators (MNOs) offering mobile services to customers in the UK, along with O2 and EE (with EE being the result of the 2010 merger of T-Mobile and Orange). 

In October 2023, the Competition and Markets Authority ("CMA") provided interested parties with an early opportunity to comment on the impact that the merger could have on competition in the UK. This invitation to comment came in advance of launching a formal Phase 1 investigation, as the CMA needed to gather information about the merger parties' UK activities, data and internal documents before beginning such an investigation.

The merger investigation

On 26 January 2024, the CMA announced that it was launching a formal Phase 1 inquiry into the merger. The CMA now has up to 40 working days to assess the deal as part of a Phase 1 investigation, considering whether the proposed merger may lead to a ‘substantial lessening of competition’ and, if so, whether a more in depth Phase 2 investigation will be required. Phase 2 investigations last between 24-32 weeks and are led by an independent panel of experts.

The CMA is now also inviting views on how the merger could affect competition. This second invitation to comment will give interested third parties a further opportunity to submit views about the impact that the proposed merger could have on competition in the UK.
As telecommunications is a regulated sector, the CMA is also engaging with Ofcom, the regulator which oversees mobile communications.

Competition concerns

Vodafone and Three have argued that based on their current market shares, they are unable to effectively compete with O2 and EE (the two largest MNOs, holding 34% and 28% shares of the consumer mobile market respectively) – and that a merged entity would be able to increase investment in mobile networks, providing better services for consumers. This view appears to be supported by an Ofcom discussion paper on its future approach to mobile markets, in which Ofcom said that there is also a risk that competition among MNOs weakens if one or more of the smaller MNOs become weaker competitors, and are less able to exert a strong price constraint on other operators. 

On the other hand, evidence from Australia (where Vodafone Hutchison Australia merged with TPG Telecom in 2020) shows that in the year following the merger, Australia’s three MNOs enjoyed increased profit margins whilst also increasing their mobile plan prices. This suggests that although a MNO merger may be profitable for the merger parties, it may also have a negative impact on consumers.

National Security concerns 

The merger does not just raise potential competition concerns. There are also potential national security concerns, with Three being owned by CK Hutchinson Holdings Limited, which is listed on the Hong Kong Stock Exchange. Unite the Union has published a dossier, arguing that being headquartered in Hong Kong means that the company could be compelled to share sensitive information with the Chinese state through the Hong Kong National Security Law. The dossier also states that key shareholders have ties to the Chinese state. 

Whilst national security concerns are not part of the CMA's remit, the government has the power under the National Security and Investment Act (the "NSI Act") to scrutinise and intervene in business transactions to protect national security. The Vodafone / Three merger is likely to fall within the scope of the "communications" sensitive area, therefore requiring mandatory notification to the government's Investment Security Unit for its approval. If the Secretary of State reasonably suspects the merger may give rise to a risk to national security, it may be called in for assessment. Following call in, the government may potentially block the merger or only allow it to proceed subject to certain conditions. 

Looking ahead

Interested parties wishing to submit views about the merger should do so by 9 February 2024. However, it should be noted that the CMA will still take into account all views already submitted as part of its preliminary invitation to comment, launched in October 2023. Therefore, it is not necessary to re-submit any comments made previously if you participated in the previous invitation to comment.

The CMA has up to 40 working days from the date of the launch of its Phase 1 investigation to carry out its assessment of the merger; it will be interesting to observe whether the merger is referred for an in depth Phase 2 investigation, given the concerns raised in Parliament that the merger may negatively affect consumers. However, even if the merger is cleared by the CMA, this is no guarantee that the merger will be able to go ahead – it will still be subject to national security review by the government in accordance with the NSI Act. 


If you have any questions about the proposed merger, the CMA's merger control procedure more broadly, or think you may be party to an acquisition which falls within the scope of the regime, please contact our authors below. 

Further Reading