After BT warned that a £15 billion merger between Vodafone and Three UK would cause prices to skyrocket, the two companies have come out swinging — pledging to cap their lowest-cost mobile plans at £10 for two years.
That means those looking for a budget deal will always be able to find a SIM plan from the newly-merged Vodafone-Three company without spending more than a tenner. The Competition and Markets Authority (CMA) has been investigating the mega-deal since it was announced last summer.
After months of deliberations, it could still choose to block the deal if it thinks customers will be left worse off. The final structure would see Vodafone own 51% of the combined business, while CK Hutchison — the Hong Kong-based parent company of Three UK — owns 49%.
At the time, Vodafone Chief Executive Margherita Della Valle described the merger as "great for customers, great for the country, and great for competition." As part of the deal, the telecom proposed a £11 billion investment to upgrade 5G infrastructure to improve mobile coverage nationwide.
After its initial investigation into the £15bn merger, the Competition and Markets Authority flagged concerns about the deal, "which combines 2 of the 4 mobile network operators in the UK", suggesting that it could "lead to mobile customers facing higher prices and reduced quality."
Three is “generally the cheapest” of the main mobile networks in the UK, with the CMA concerned that combining its business with Vodafone would "reduce rivalry between mobile operators to win new customers“, causing prices to rise.
However, executives from Vodafone and Three have publicly disagreed with the assessment of the Competition and Markets Authority. Nevertheless, they've taken steps to set out new commitments as part of efforts to address the regulator’s concerns.
This included a promise to maintain tariffs at £10 a month, or less, for two years from the completion of the merger, for “value-focused” customers on SMARTY deals. SMARTY, which is owned by Three UK and uses the same network, currently offers plans for as little as £5 a month.
The new cap will also apply to Voxi For Now social tariffs, which are available for people receiving government benefits. Voxi is a brand owned and operated by Vodafone.
Addressing the CMA, Vodafone and Three said they will also encourage so-called virtual providers to access their network, so smaller operators can offer good deals for customers. These brands leverage the nationwide network of masts but operate as independent brands. Tesco Mobile is an example of a virtual provider as it uses O2's network, while Currys-owned iD Mobile uses the Three network.
Furthermore, Vodafone and Three reiterated their commitment to invest £11 billion in the UK’s infrastructure, adding that they are “happy for Ofcom to monitor and enforce” the plans. The CMA had voiced concerns that the investment pledges were “overstated” and may not come to fruition.
Three UK, one of the most affordable mobile networks in the UK, could be merged with Vodafone as part of a £15 billion mega-deal ...provided the CMA gives its blessing in December
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Meanwhile, Vodafone also announced that it will be pushing ahead with the tie-up without asking for approval from shareholders. Changes to UK listing rules, which came into force this year, mean listed companies no longer need shareholder approval for significant transactions such as acquisitions.
The merger would create the UK’s largest mobile phone network with some 27 million customers.
The CMA’s final decision on the deal is due on December 7.
Additional Reporting By Anna Wise, PA Business Reporter
