A big change might be coming to the mobile phone industry in the UK, and it’s causing quite a stir. Two major telecom companies, Vodafone and Three, are planning to merge, but there are concerns that this could make mobile bills more expensive for millions of people. The UK’s Competition and Markets Authority (CMA) has been looking into this deal and is worried that it might hurt customers, especially those who struggle to afford mobile services.

What’s the Deal?

Vodafone and Three are two of the four biggest mobile network operators in the UK. They’re looking to join forces, and if this merger goes through, they will become the largest mobile operator in the country. Together, they would have over 27 million customers, which would put them ahead of other major players like EE (owned by BT) and Virgin Media O2.

The plan has been in the works for a while, with talks starting last autumn. As part of the deal, Vodafone and Three’s parent company, Hutchinson CK, have promised to invest £11 billion in the UK over the next decade. This investment would go towards improving mobile networks and rolling out better 5G services.

The Watchdog’s Concerns

The CMA, which is in charge of making sure businesses don’t harm consumers by limiting competition, isn’t convinced that this merger is a good idea. After investigating the deal for five months, the CMA shared its initial thoughts and found some serious issues. They believe the merger would lead to less competition in the mobile market, both for retail customers (people who buy mobile services) and for wholesale customers (other companies that use mobile networks to provide their own services, like Lebara and Sky Mobile).

The CMA is particularly worried about people who already find it hard to pay for their mobile services. If Vodafone and Three combine, the CMA thinks these customers might face higher bills and fewer choices. The watchdog said the deal could lead to “substantial lessening” of competition, which usually means fewer options and higher prices for consumers.

What Vodafone and Three Say

Vodafone and Three don’t agree with the CMA’s findings. In a joint statement, they argued that merging would actually make things better for the UK mobile market. They said that the current market is “dysfunctional” and that combining forces would bring more competition, not less. They also promised that the merger would lead to more investment in mobile networks, especially in expanding 5G coverage across the UK.

Margherita Della Valle, Vodafone’s CEO, said the merger would be a “catalyst for change.” She believes it would help improve the country’s mobile infrastructure and boost the economy. Della Valle also pushed back against the CMA’s concern about higher prices, saying there are no plans to raise mobile bills. “We do not see the possibility of pricing increasing going forward,” she said. She also mentioned that the CMA’s decision isn’t final and that Vodafone is looking forward to working with the regulator to address their concerns.

Robert Finnegan, the CEO of Three UK, added that the merger would bring the best 5G services to the country, which would benefit all mobile users.

What Could Happen Next?

The CMA has not made its final decision yet. The two companies have been given some time to respond to the concerns raised by the CMA and suggest ways to fix the issues. The watchdog is asking for assurances from Vodafone and Three that they won’t harm competition if the merger goes through. One way they could do this is by making legally binding commitments to keep investing in the mobile networks and to protect both retail and wholesale customers from being negatively affected by the deal.

The CMA said it will make its final decision by 7 December. If Vodafone and Three can’t convince the regulator that their merger won’t harm competition, the CMA could block the deal entirely.

Why the Wholesale Market Matters

One of the big concerns raised by the CMA is about the wholesale market. The wholesale market is important because it allows smaller mobile providers, called mobile virtual network operators (MVNOs), to use the networks of big companies like Vodafone and Three to offer their own services. Companies like Lebara, Lyca Mobile, and Sky Mobile rely on these networks to provide affordable options to customers.

If the number of big network operators in the UK shrinks from four to three, MVNOs could find it harder to negotiate good deals. This would likely mean that they wouldn’t be able to offer their customers the same low prices and services they do now, which could hurt people who rely on these more affordable options.

Could There Be Benefits?

Despite its concerns, the CMA did admit that there could be some benefits to the merger. For example, bringing together Vodafone and Three could lead to better mobile networks and faster 5G rollouts. However, the regulator is not convinced that these benefits would be enough to outweigh the risks. The CMA thinks that a merged Vodafone-Three might not feel as much pressure to follow through on their investment promises once the deal is done.