The competition regulator has been urged to launch an in-depth investigation into the planned £18 billion merger between Vodafone and Three in the UK by the Commons business and trade committee.
In a letter to the Competition and Markets Authority (CMA), Liam Byrne, the committee’s Labour chairman, said it believed the tie-up would result in a “substantial lessening of competition”, given the “significant doubts” that had been raised by witnesses on the benefits of the deal at a recent parliamentary hearing.
“As such, the committee believes that the CMA has a duty to launch an in-depth phase two assessment.”
The proposed combination of Vodafone and Three, owned by the Hong Kong-listed conglomerate CK Hutchison, would create Britain’s biggest mobile network. It would cover almost a third of the UK mobile phone market.
The CMA announced an initial phase one inquiry into the deal last month and has until March 22 to reach a decision on whether to refer the deal to a more in-depth phase two inquiry.
The committee’s letter comes after it held an evidence session in October with Vodafone and Three executives, economists, mobile specialists and Unite, the union.
The witnesses included Tommaso Valletti, professor of economics at Imperial College London and former chief competition economist at the European Commission.
“Three and Vodafone have argued that merging will eliminate duplicate investment, expand capacity and enable the merged entity to compete at an infrastructure level,” the committee wrote to the CMA. “Yet economist Professor Valletti told us in our October evidence session that he has found no evidence that consolidating networks increases investment.”
It added: “Three and Vodafone told us that they do not plan to increase prices for consumers if they merged. However Professor Valletti’s research has found that prices decline slower in markets with three MNOs [mobile network operators] compared to those with four MNOs.”
The merger has provoked cross-party concerns and Labour shadow ministers have been pressing the government over national security risks. Byrne also led a parliamentary debate in December.
Ahmed Essam, the chief executive of Vodafone UK, has said the deal would “significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players”.
Robert Finnegan, the boss of Three UK, has said it would “unlock £11 billion of investment that will help the UK to close the 5G gap with leading European countries and realise its ambitions to be a frontrunner in digital connectivity”.
The CMA declined to comment until after the outcome of the phase one investigation.
