LONDON – Vodafone and Hutchison’s Three UK have stepped up their bid to secure regulatory approval for their £19 billion merger by making significant price pledges aimed at easing concerns over competition and consumer pricing. The commitment involves maintaining low prices on their budget brand, SMARTY, for two years and improving access to their network for smaller competitors.
This move is particularly important as the UK’s Competition and Markets Authority (CMA) is currently evaluating the merger. The CMA has indicated potential concerns, highlighting how reducing the number of main mobile operators from four to three could lead to higher prices for consumers. The regulators expressed earlier this month their hesitation, stating they were worried about how the merger could negatively impact competition.
Vodafone and Hutchison have reportedly disagreed with the CMA’s assertions. They are emphasizing their planned investments, amounting to £11 billion, to upgrade and expand their combined network infrastructure. The firms have also pointed out they are willing to sell parts of their combined spectrum to Virgin Media O2, which would allow for greater competition within the market.
Acknowledging the CMA’s apprehensions, the companies have proposed additional commitments. They aim to keep prices for SMARTY, which has over 1 million users, at £10 or below. They also plan to maintain social tariffs to safeguard vulnerable customers from mid-contract price hikes. These measures could help mitigate fears of price increases associated with the merging of the two firms.
Besides maintaining price levels, Vodafone and Hutchison have also offered to provide access to their joint network on pre-defined terms to third-party operators serving 2.5 million customers or fewer, which could promote competition and keep market dynamics healthy.
With the proposal now submitted, the CMA is expected to announce its decision by December 7, 2024. This time frame has heightened expectations within the sector as stakeholders await clarity on the merger's ramifications.
“We will continue to positively engage with them (the CMA) to resolve outstanding matters,” Vodafone and Hutchison insisted through their joint statement. They highlighted the pledged investments and reassurance of competitive practices will fortify their case for the merger.
Meanwhile, Vodafone’s shares dipped by 0.3%, aligning with the broader trend seen on the FTSE 100 index during midday trading.
This merger is not just about merging companies; it’s about reshaping the mobile telecommunications market within the UK. By combining forces, Vodafone and Hutchison aim to create formidable competition against established players like BT's EE and Virgin Media O2.
There’s also the question of whether this consolidation will stifle innovation or encourage it by allowing the newly merged entity to invest more significantly in network capabilities and technological advances. Analysts will be closely monitoring how the market responds to these price pledges and the regulatory developments over the coming weeks.
Overall, the commitment from Vodafone and Hutchison reflects their strategy to alleviate public and regulatory concerns about their planned merger. By addressing key points related to consumer prices, access for smaller operators, and the overall health of the telecommunications market, the companies assert they are taking responsible steps to gain approval and maintain competition within the sector.
While the officials await the CMA’s decision, both firms will likely continue their campaigns to secure the necessary approvals and showcase their readiness to strengthen their combined presence within the competitive telecommunications market.
It remains to be seen how these commitments will translate to tangible benefits for consumers once the merger is finalized, but the stakes are undoubtedly high, and both companies are gearing up for what could be pivotal weeks.
