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15/12/2024

Vodafone and Three Signalled for CMA Approval

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This week’s key terms/concepts:

• Competition and Markets Authority (CMA): The main competition regulatory body in the UK.

• Behavioural remedies: A type of antitrust remedy considered by competition agencies whereby a merging company must comply to changing conduct, such as ensuring competitor access to infrastructure.

• Oligopoly: A market in which a few companies hold significant power in that particular market or industry.

The Competition and Markets Authority (CMA) has conditionally approved the £16.5bn merger of Vodafone and Three, creating the largest phone network in the UK. This follows the CMA’s formal investigation into the merger announcement from January this year, and now conditions will need to be met by Vodafone and Three for the merger’s formal completion.

Why is this important?

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The CMA initially expressed concerns about the merger’s potential to reduce competition in an already oligopolistic UK telecoms market. Three’s attempts to merge with O2 in 2015 had been blocked by the European Commission the following year over competition concerns, and both Three and Vodafone are currently two of the four largest operators in the UK. However, in a later phase of the investigation, the CMA acknowledged that the merger may benefit consumers by creating jobs and driving investment in network infrastructure– particularly in 5G. Vodafone’s CEO, Margherita Della Valle, sought to mitigate concerns about rising prices stating that the deal would be ‘self-funded’, avoiding consumer price hikes to generate returns.

What impact does this have on the legal sector?

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This deal highlights the legal framework around the Mergers & Acquisitions sector. The CMA stated the merger would only be accepted if Vodafone and Three offered ‘behavioural remedies’ – legally binding commitments – that address their concerns about higher bills and reduced services. Further conditions that Vodafone and Three need to meet include a cap on tariffs and data plans for 3 years, as well as the legal obligation for Vodafone & Three to annually report to Ofcom and the CMA to combat concerns that the benefits of the merger may not be as significant as promised. To help other businesses, the CMA also imposed a condition for Vodafone and Three to work with smaller telecom businesses to allow for more competition in the market. 

Several Magic Circle firms advised on the deal, with Slaughter and May advising Vodafone, while Freshfields and Linklaters advised CK Hutchison, the parent company of Three. Linklaters and Freshfields also advised CK Hutchison previously on the attempted Three-O2 merger. 

The merger is expected to be formally completed during the first half of 2025. 

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