UK dials up fresh signal of telco M&A optimism
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon
BERLIN, Sept 13 (Reuters Breakingviews) -Vodafone VOD.L and Three “don’t agree” with the Competition and Markets Authority on a crucial point of their $19 billion merger - that it may end up increasing the monthly mobile bills of the third and fourth biggest UK telcos’ millions of consumers. But that is beside the point. What matters more is that Britain’s antitrust watchdog, in the provisional findings it published on Sept. 13 after its investigation of the deal, pointed the way to the ultimate greenlight of the merger at the end of the year – and that this may develop into a trend.
Outgoing European Commission antitrust tsar Margrethe Vestager blocked a 2016 deal between Three and O2, on the grounds that reduced competition would mean remaining telcos could hike prices. In 2024 Vodafone’s Three merger, which would reduce the number of mobile operators in the UK from four to three, carries the same risk. But along with other operators throughout Europe, Vodafone and Three have long argued the best way to boost competition is to have financially robust operators able to invest the billions needed to build networks of the future. The two UK groups have promised to invest some 11 billion pounds in the coming years to modernise their networks.
They will now negotiate with the UK watchdog on solutions to address its concerns. Yet the main point of the CMA’s findings is that it isn’t suggesting so-called structural remedies to the merger plan - which could have involved divesting some assets. That’s different to Spain’s Orange-MásMóvil, which was okayed but with the requirement for the merging parties to sell spectrum assets. The CMA acknowledges that the deal would improve the quality of services and accelerate the deployment of next generation 5G services. In other words, most issues can be solved in the next few weeks by negotiations between the two sides.
The UK’s accommodative stance doesn’t guarantee a wave of price-inflating European mergers, and Vestager’s replacement is yet to be confirmed. But ex-European Central Bank chief Mario Draghi’s recent report on EU competitiveness explicitly advocated looking at bloc-wide rather than national market shares when determining merger merits. That chimes with the different mood music telcos have been hearing of late, notably in Brussels. They may soon hear a real tune.
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CONTEXT NEWS
Vodafone's $19 billion merger with Three UK could push up bills for millions of mobile customers and impact providers like Sky Mobile by reducing the number of networks from four to three, Britain's competition regulator said on Friday.
However, the Competition and Markets Authority (CMA) also said the deal could improve network quality and speed up the deployment of next generation 5G, adding it would examine solutions to its concerns before making a final decision on the matter in December.
The tie-up, announced 15 months ago between Vodafone and Three UK, owned by Hong Kong's CK Hutchison, has challenged the regulator's previous stance that four networks are required to keep prices low.
Vodafone total returns since announcement of merger plan with Three https://reut.rs/47nbxRn
Editing by George Hay and Streisand Neto
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