Vodafone-Three Merger Approved by UK Regulator With 5G Investment Conditions

The UK's Competition and Markets Authority (CMA) has approved the merger between Vodafone and Three UK, clearing the way for the creation of Britain's largest mobile operator. The approval comes with legally binding commitments requiring both companies to invest billions in rolling out their combined 5G network across the country.

The CMA's decision appears to be something of a turnaround from its initial concerns in September, when it warned the merger could lead to higher prices for customers. The regulatory body now says it's satisfied that the proposed network commitment, along with consumer protections, will address competition concerns.

Under the terms of the approval, the merged company must fulfill several key obligations over the next eight years. These include implementing a comprehensive network upgrade plan and adhering to price controls for the first three years. The agreement also requires the company to offer preset contractual terms to mobile virtual network operators that rely on their infrastructure.

The combined entity will serve approximately 27 million mobile subscriptions, surpassing current market leaders Virgin Media O2 and EE. Vodafone will initially hold a 51 percent stake in the venture, with plans to acquire the remaining 49 percent after three years.

In a press release statement, Stuart McIntosh, chair of the CMA's independent inquiry group, said: "Having carefully considered the evidence, as well as the extensive feedback we have received, we believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed."

The merger's implementation will be jointly overseen by the CMA and Ofcom, the UK's communications regulator. The combined company will be required to publish annual reports detailing its progress on the network plan, with the CMA specifically monitoring consumer tariffs and wholesale terms.

The £16.5 billion ($20.9 billion) deal is expected to complete in the first half of 2025, pending the companies' formal acceptance of the CMA's conditions. Notably, the same competition watchdog last year initially blocked UK approval for Microsoft's proposed $69 billion takeover of Activision Blizzard, before later clearing it under a new deal in which Microsoft would not acquire Activision's cloud streaming rights outside the EEA.