The CMA’s initial review of the proposed merger between Three and Vodafone in the UK is likely to have identified several competition concerns. As such, we fully anticipate an in-depth Phase II investigation, which could last up to 32 weeks.
James Robinson, Senior Analyst at Assembly comments:
“This deal is all but guaranteed to trigger a Phase II review. The CMA didn’t clear BT’s acquisition of EE in 2016 in Phase I – and that was a far less controversial transaction that didn’t remove a competitor from the market.
“A decision after only 56 days would also have been an incredible turnaround given we estimate an average review period of 249 days for similar four-to-three mergers seen elsewhere in Europe. The parties would have had to offer up something significant to secure approval at this stage, which would have been ambitious with such a short timeline to work with.
“We expect the CMA’s assessment so far to have focused on spectrum holdings, network sharing, MVNO access and retail prices. Some of these issues will be easier to address than others. We don’t expect to see appetite for measures to facilitate a new entrant. Such a remedy, while used elsewhere (including recently in Spain), would undermine the rationale for the merger in the first place.
“A combined holding of around 50% of total spectrum, and notably a high degree of capacity, makes this one of the most contentious issues of a merged Three/Vodafone. Based on our analysis, in five out of six similar transactions offering spectrum divestment was necessary to get the deal through.
“It seems entirely plausible that a set of commitments, for example divesting spectrum and/or exiting network sharing agreements, could be agreed during the next phase that would be acceptable to the CMA and see the deal approved.”
Annex
James Robinson is a Senior Analyst at Assembly. Before joining Assembly, James was a competition policy manager at Ofcom where he was project manager for the team advising the CMA and EC on the BT/EE and O2/Three merger reviews.
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press@assemblyresearch.co.uk
