LONDON (Reuters) -A planned merger between Vodafone’s UK operation and Hutchison’s Three UK unit could face a 24-week in-depth investigation after Britain’s antitrust regulator said on Friday the tie-up risked leaving consumers worse off.
The $19 billion deal was announced last year, and if it proceeds, would reduce the number of mobile networks in Britain from four to three. It would therefore be expected to require an in-depth investigation on the basis of the long-held tenet that at least four networks are required to keep prices low.
The Competition and Markets Authority (CMA) on Friday gave the two companies five working days to respond with “meaningful solutions” to its concerns that the merger will result in higher prices for consumers and businesses, and lower investment.
Given the complex nature the deal, with no clear cut divestments available to address competition concerns, it seems likely the deal will proceed to the CMA’s phase 2 investigation, lawyer Tom Smith at Geradin Partners said.
“It’s really not a plausible outcome,” said Smith of the potential for the CMA’s concerns to be resolved within the five day window.
The 24 week in-depth study can be extended by eight-weeks in certain circumstances.
The CMA said in its statement that competitive pressure was needed to help keep prices low and spur investment.
“Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims,” Julie Bon, the regulator’s Phase 1 decision-maker said in a statement.
“These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”
As part of the deal, the two companies pledged to spend 11 billion pounds ($13.87 billion) on 5G networks, in keeping with the government’s stated aim to improve Britain’s communications.
The companies said this meant the deal would benefit consumers as new technology is rolled-out more rapidly.
($1 = 0.7930 pounds)
(Reporting by Paul Sandle and Sarah YoungEditing by Mark Potter, Tomasz Janowski and Barbara Lewis)
