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The U.K.\u2019s Competition and Markets Authority (CMA) is launching<\/a> a formal probe into the proposed merger between Vodafone and Three UK.<\/p>\n The news hardly comes as a surprise, given that the \u00a315 billion ($19 billion) joint venture would reduce the U.K.\u2019s main infrastructure-owning mobile networks from four to three (the other two being EE and O2), and the duo had already allowed until the end of 2024 for the deal to conclude. That is some 18 months form when they first revealed their plans back in June<\/a>.<\/p>\n \u201cThis deal would bring together two of the major players in the U.K. telecommunications market, which is critical to millions of everyday customers, businesses and the wider economy,\u201d CMA chief executive Sarah Cardell said in a statement. \u201cThe CMA will assess how this tie-up between rival networks could impact competition before deciding next steps.\u201d<\/p>\n Today\u2019s news signals the start of what is known as a \u201cphase 1\u201d investigation, which will involve assessing whether a proposed merger will create a \u201csubstantial lessening of competition,\u201d while gathering key data from the parties involved, competitors, customers, among other stakeholders. This initial market analysis phase can take up to 40 days, after which the deal may proceed to a more in-depth \u201cphase 2\u201d investigation which can last a further six months \u2014 hence why Vodafone and Three had allowed themselves until the 2024 for the deal to be greenlighted.<\/p>\n \u201cIt was certain that the CMA would open a formal investigation \u2014 it is also certain to proceed to a full Phase 2 investigation,\u201d Tom Smith, a former CMA legal director who\u2019s now partner at London-based law firm Geradin Partners, explained to TechCrunch. \u201cThis means we should expect the CMA\u2019s final decision in the Autumn.\u201d<\/p>\n Three has in fact been in embroiled in one previous failed acquisition effort, when its parent company Hutchison tried to procure O2 in a \u00a310.25 billion deal \u2014 this was kiboshed by EU regulators<\/a>, though the deal reared its head again in 2022 when a European court adviser suggested<\/a> the original court ruling should be dismissed. It\u2019s not entirely clear how that might impact this latest merger attempt, but Smith reckons that deal is as good as dead, regardless of what any court might subsequently find.<\/p>\n \u201cThe previous Three\/O2 merger is still technically going through the EU courts, but that deal is long since dead in reality,\u201d Smith said. \u201cThe current deal will be reviewed on its own merits in any case.\u201d<\/p>\n With a full phase 2 merger investigation a likely outcome here, it will be up to Vodafone and Three to convince the CMA that the benefits outweigh the reduced competition.<\/p>\n \u201cWe strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players,\u201d Vodafone UK CEO\u00a0Ahmed Essam said in a statement. \u201cOur commitment to invest \u00a311 billion will build capacity to meet the exponential growth in demand for data and accelerate the roll out of Advanced 5G across the UK, delivering benefits to consumers and businesses throughout the nation.\u201d<\/p>\n It\u2019s worth noting that there is in fact an additional regulatory aspect to this deal beyond competition concerns. On Wednesday, the U.K. Cabinet Office said<\/a> that a 14.6 percent stake that United Arab Emirates (UAE) telecoms group called e&<\/a> holds in Vodafone could pose a national security risk<\/a>, and ordered a security committee to be set up at Vodafone to \u201coversee sensitive work that Vodafone and its group perform which has an impact on or is in respect of the national security of the United Kingdom.\u201d<\/p>\n Three, meanwhile, is owned by CK Hutchison Holdings<\/a>, a Hong Kong-based conglomerate that is subject to a national security law introduced by China in 2020<\/a>.<\/p>\n \u201cIt has been clear for some time that the proposed merger will also have an additional regulatory dimension under the National Security and Investment Act<\/a> given Three\u2019s links to China via its Hong Kong ownership\u00a0 \u2014 and the impact of China\u2019s national security law in Hong Kong,\u201d Alex Haffner, a competition partner at U.K. law firm Fladgate, said in a statement. \u201cThis allied to the UAE company e&\u2019s recent 14.6% stake in Vodafone, which has already undergone a security review by UK government under the Act, means that the merging parties now face high level governmental as well as regulator scrutiny of the deal.\u201d<\/p>\n<\/p><\/div>\nPhase 1<\/h2>\n
National security<\/h2>\n