🔳 BRIEFING
The UK could be down to just three mobile network operators by the end of 2024, with Vodafone and Three’s parent companies planning to merge their UK networks.
The combined Vodafone-Three UK network would have around 27 million customers. Three in particular attracts data hungry streamers with its low prices. Vodafone is a strong player in the business mobile market.
- However, the deal will have to be approved by regulators.
- If approved, customers of both networks won’t see any changes until late 2024 at the earliest.
- This means customers signing a 12 or 18 month contract today on either Vodafone or Three are unlikely to see any changes to their service or network coverage during the contract period.
As a sweetener to Government and regulators, Vodafone and Three’s owner CK Hutchison say they will invest £11bn in standalone 5G. This is a move that could bring UK mobile services up to the standards seen in other countries, where standalone 5G is already being widely deployed. In the UK, most 5G connections are via non-standalone 5G connections, which rely on a 4G signal to deliver uploads.
Potential blocks
More expensive services?
But there are fears the merger could have an impact on the prices paid for mobile broadband services.
- Three and Vodafone’s unlimited data plans are popular with customers who want to freely stream vast amounts of content via their mobile device or mobile broadband router.
- Three’s mobile broadband solution is popular with home movers, who may find themselves without a fixed broadband connection for a short period.
- Currently, Three and Vodafone offer some of the most budget-friendly options in the UK. Three and offshoot Smarty offer a selection of low cost unlimited data plans. Via the Vodafone network, Voxi, Asda and Lebara offer contract-free unlimited data, with prices for an up to 150Mbps connection from £24 a month on Asda.
Opposition
The Unite union says UK consumers would pay up to £300 more per year on their mobile bills if the merger completes.
- The union also raises concerns regarding Three’s parent company CK Group regarding Chinese state repression in Hong Kong.
- Unite claims a merger would give the CK Group significant control over the data of 27 million customers —and access to sensitive public sector contracts.
- It argues that Vodafone is currently a strategic supplier to the UK public sector. The company provides data and telecoms services to the Ministry of Justice, including running a pre-recorded evidence service for survivors of rape and sexual violence. It also provides the infrastructure for the NHS 111 helpline. Unite says that as Three is not currently a public sector supplier, this merger would give Three and CK Group direct access to sensitive government telecoms contracts for the first time.
How Vodafone and Three want to assure customers and regulators
To allay fears of Chinese control over UK infrastructure, the deal announced today would see the combined company led by Vodafone. It would hold a 51% stake in the joint venture company. Vodafone would have the option to buy out CK Hutchison Group in the coming years, allowing CK Hutchison to exit the UK mobile market.
- Vodafone and Three have confirmed current pricing strategies won’t change, and there will still be contract-free options with no annual price rises.
- The companies say that customers will benefit from a better network from “Day 1”, suggesting customers will be able to roam on to the network with the best signal in their area before they are fully combined. This would follow a similar path taken by Orange and T-Mobile when their parent companies merged the two networks.
- There’s also a pledge to maintain social tariffs, free from inflation-busting price rises.
In other countries where four networks have been allowed to go down into three networks, regulators have enforced commitments to protect Mobile Virtual Network Operators (MVNOs). These operators piggyback off one of the networks. UK examples include Lebara (Vodafone) and Tesco Mobile (O2). In Ireland, the European Commission ordered remedies to ensure a competitive force in the Irish market remained after O2 and Three merged.
Should a similar approach be taken in the UK, you’ll still be able to choose from a variety of smaller, often cheaper operators.
Similar mergers
The Vodafone UK and Three UK merger will come as a result of a joint venture created by Vodafone and CK Hutchison Group.
If approved by the regulators, it will become the third such mega-merger in the media and telecoms industry in the last five years.
- Telefonica and Liberty Global created a joint venture as a means to merge O2 and Virgin Media in the UK.
- Then BT and Warner Bros Discovery announced another joint venture as a tool to merge BT Sport with Discovery’s sports networks. Legally, this completed last year, but will only become more apparent to viewers from next month, when the BT Sport name disappears from screens.
BT has an option to exit the joint venture in the coming years, in a similar manner to the proposed exit clause for CK Hutchison allowing Vodafone to take full control.
All three joint ventures facilitate a merger of assets to allow their parent companies to reduce exposure and restructure debt. It also enables one of the parent companies to eventually offload their UK business.
Marc Thornham