A planned £15bn merger between Vodafone and Three UK, which is aimed at creating the UK’s largest mobile phone operator, could leave up to 1 million Three customers unable to choose a cheaper alternative operator, a trade union has claimed.
Unite is calling for the Competition and Markets Authority (CMA) watchdog to block a planned tie-up between two of the four mobile network operators in the UK that would bring 27 million customers under a single provider.
If the deal goes ahead, the combined group would leapfrog EE, owned by BT, and Virgin Media O2, owned by Spain’s Telefónica and the US-listed company Liberty Global.
The union, which fears the deal could lead to job losses and higher prices, says Three customers are particularly exposed to price rises that are likely to result from a merger.
The CMA has opened a phase 2 investigation into the deal and had been due to publish its final conclusions by 12 October. It has now extended the statutory deadline to publish its final report to 7 December due to the complexity of the deal.
In Unite’s submissions, published on the CMA’s website, the union said a study conducted by the research agency Survation of 1,000 Three UK consumers showed price was the main driver for the network’s customers. Its study found 39% of Three users said they would switch to an alternative operator post-merger, with 9% saying they would move to Vodafone.
“On the basis that Three is the lowest-priced MNO [mobile network operator] in the UK market and prices are very likely to rise post-merger, the 9% of Three customers who would choose to move to Vodafone would immediately lose their ability to choose a cheaper operator as a result of this reduction in competition,” Unite said in its submissions.
The union said that if its polling results were extrapolated for Three’s current customer base, about 1 million consumers would be left unable to choose a cheaper alternative operator.
Unite also cited research showing that 23% of Three customers earning less than £20,000 a year would be unable to afford their mobile phone bills if prices rose by £6 to £10 a month post-merger. “If the deal is passed, all credible evidence suggests that UK consumers – and Three customers in particular – will be asked to pay more. This is a recipe for larger company profits and shareholder returns, not a competitive market that delivers for consumers,” Unite said in its submissions.
Vodafone and Three have argued the current market consisting of four mobile network operators is unsustainable and consolidation is needed because of demand for greater investment in 5G networks.
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Margherita Della Valle, Vodafone’s chief executive, told the Guardian last month that Labour would fail to achieve its promise of nationwide access to 5G, which is essential for next-generation technologies such as artificial intelligence, by 2030 if the telecom company’s £15bn merger was blocked.
Vodafone and Three have said the combination of the third- and fourth-largest players in the market is essential to drive investment and compete against the “big two”, BT and Virgin Media O2, including on competitive pricing. As part of the takeover plan, the companies have pledged to invest £11bn over the next decade to upgrade and expand their 5G network.
The CMA has already carried out an initial phase 1 investigation looking at whether the deal might lead to a “substantial lessening of competition” and in April it opened a phase 2 investigation saying it had identified concerns that the transaction could lead to higher prices for customers and lower investment in UK mobile networks.
