BT warns Vodafone-Three merger will lessen competition and deter investment

Telecoms giant tells CMA deal will result in higher prices and poorer network quality.

BT has raised concerns that the proposed Vodafone and Three UK merger will "substantially lessen competition and deter investment".

In its response to the Competitions and Markets Authority (CMA) investigation into the planned £15 billion merger, BT said that the deal will create a merged entity with a disproportionate share of capacity and spectrum.

The CMA decided in April to refer the proposed merger between Vodafone and Three UK for a full investigation, having started the first phase of its probe in January.

BT's 40-page response was one of 10 responses to an issues statement that the CMA released in May setting out the scope of its inquiry.

BT agreed with the CMA’s conclusion from phase one of the investigation that the merged entity's participation in Mobile Broadband Network Limited (MBNL), the network-sharing joint venture between BT and Three UK, will result in lower levels of investment.

It also concurred with the regulator's view that the merger will result in direct harm to BT's ability to compete.

"Whilst each of these three concerns is significant in and of itself, their combination exacerbates the adverse impact the merger will have on competition in UK mobile markets and, ultimately, UK consumers," wrote BT.

It added, "Overall, BT believes that the combination of extreme capacity and spectrum asymmetry arising from the merger, along with the unprecedented access that the merged entity will have to BT's (as well as to VMO2's) strategic investment plans, and the merged entity's ability and incentive to disrupt the effective functioning of MBNL, will give rise to a substantial lessening of competition in UK mobile telecoms markets, ultimately resulting in higher prices, poorer network quality, and reduced incentives to invest – all to the detriment of UK consumers."

Unite the Union also welcomed the CMA's phase two inquiry and said that the deal "must be blocked". It repeated its strong objections that the deal would result in job losses, higher prices, and "further profiteering, without delivering the promised investment".

The union also raised concerns about national security and anti-union activities associated with Three UK's owner, CK Hutchinson. Vodafone and Three UK have dismissed these allegations.

However, some of the responses to the CMA backed the merger. Ericsson argued that it could create a more sustainable market structure, offer returns on digital infrastructure investments and attract more capital into the network.

"Consolidation is broadly seen as a pivotal measure towards helping operators to attain the necessary scale for expanding their future network infrastructure," Ericsson wrote.


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