Vodafone and Three obtain CMA clearance for €17.5 billion UK mobile telecom JV

Compass Lexecon has provided economic advice to CK Hutchison Holdings Limited (‘CKH’), owner of telecommunications operator Three UK, in the context of the planned Joint Venture (‘JV’) between Vodafone UK and Three UK. The UK Competition and Markets Authority (‘CMA’) has cleared the transaction after a Phase II investigation, conditional upon network investments and customer protection measures, in December 2024.

Situation

Vodafone UK and Three UK are the country’s third and fourth largest mobile telecommunications operators in terms of subscribers. In June 2023, they announced their plans to combine their activities. CKH instructed Compass Lexecon to assist with the merger review by the UK CMA.

Our Role

We assisted CKH during the pre-notification phase at the CMA, with the preparation of the final Merger Notice and RFI responses, as well as during Phase I and Phase II proceedings. We assessed the competitive effects of the transaction, including whether horizontal effects were likely to arise in the retail or wholesale market, as well as rivalry-enhancing efficiencies (REEs) related to costs and network quality. To assess the consumer benefits related to the network quality improvements expected to be brought about by the transaction, we conducted a merger-simulation analysis based on discrete-choice survey data.

Separately, commissioned by CKH and Vodafone, the team conducted a meta-study of four-to-three mergers in the mobile telecommunications sector for the European Competition Law Review, with a summary available here.

Outcome

In December 2024, following an in-depth investigation, the CMA gave its final clearance to the deal subject to a legally binding commitment on the Parties to make long-term network investments, including widespread 5G rollout, as well as short-term customer protection measures to address concerns over competition and price increases. Conditional upon these commitments, the CMA considers “the merger is likely to boost competition in the long term in both [retail and wholesale] markets and result in significant increases in mobile network quality in the UK”.

The team

The Compass Lexecon team was headed by experts Jorge Padilla, Thilo Klein, Alejandro Requejo, Patricia Lorenzo, and Paul Reynolds, and included Bernardo Sarmento, Francisco Franchetti, Jasper Haller, Sergey Khodjamirian, Scott Holbrook, Esteban Cattaneo, Jin Kiat Tan, Victor Hernandez, Martin Wickens, Alejandro Redondo, Hendrik Schiermeyer, Marie Theres Kraihammer, Thomas Coibion, Giulio Paltrinieri, Tara Ghobadian, Zsolt Hegyesi, Ishwara Hegde, Julie Klein, Matilde Calvani, Pedro Pereira, Ines Noval, Nina Nguyen and Ali Musali.

They worked with CKH’s external counsel from Freshfields, led by James Aitken.