What Do Telecoms Mergers Mean For Your Mobile Contract?

Vodafone and Three announced plans to merge in a new joint venture that would create the biggest mobile network in the UK. This isn’t the first time we’ve seen two mobile operators become one — but what does a merger involve, how are they evaluated and how do they impact customers? In this article, SIM-only mobile provider spusu, explains.

What is a merger?

When two companies merge, they form a new company, ceasing to exist as separate businesses. Mergers happen when companies identify advantages in coming together as one business, rather than competing against each other. These advantages can vary from venturing into new business sectors, wanting to offer new products and services and decreasing competition rivalry — with the end goal to increase shareholder value. The last telecoms merger to take place was Virgin Media and O2 in 2021. Prior to that, Three and Orange merged in 2010 to create EE.

While the consequence of telecoms mergers as a positive or negative outcome is subjective, they must be investigated by the CMA regardless.

Investigating impact

Before mergers can take place, the impact it could have on both customers and industry must be evaluated. Take for example the merging of Vodafone and Three. This would bring their collective 27 million customers together under a new, single network provider. To assess how this merger would impact those millions of customers, the CMA must investigate the impact. In January 2024, the CMA conducted a 40-day phase of the investigation to determine if the deal could substantially negatively impact the telecoms market, and its consumers, focusing on how it might affect choice and costs for UK consumers and businesses.

Following this, Phase 2 began in April 2024 to collect additional evidence from Vodafone and Three to explore any potential competition concerns that the merger could cause. In May 2024, the Cabinet Office in a "final order" said the secretary of state had approved the proposal subject to conditions under the National Security and Investment Act.

What’s the deal?

When companies merge, it creates a larger and more competitive player in the market, which could lead to increased market power and potentially better services for that company’s customers.

On the other hand, mergers often raise concerns about how reduced competition can lead to higher prices for consumers — something which at this current time, no customer wants to see. However, it’s important to be clear that the exact implications of any telecoms merger would depend on regulatory approval and the specific terms of the deal.

However, while mergers can seem daunting for the customers affected, there are benefits to be enjoyed. The merging of two large telecoms providers involves combining infrastructure, technologies and additional investment. This enables customers from both sides to benefit from this, such as enhanced network coverage and quality.

Although the impact of the merge between Vodafone and Three is yet to be seen, representatives of both companies have expressed that it will not increase prices, despite it reducing the number of competitors in the mobile market. They have highlighted how the deal could increase competition, by enabling the new firm to compete with other mobile operators in the smaller, mobile virtual network operator (MVNO) marketplace. Instead of spending millions establishing their own infrastructure of masts and systems, MVNOs license segments of other operators' networks and offer their own cut-price deals.

With this in mind, it’s also been argued that bills could come down, because the new company would be able to invest more in the UK and drive down the price of internet access.

From Virgin Media and O2, to Vodafone and Three, telecoms mergers never fail to shake up the industry, and the minds of customers. But mergers are not all bad news. They can provide customers with better quality, coverage and services. But, as the industry continues to evolve, it will be crucial for regulators to closely monitor the impact of this merger to ensure fair competition and optimal outcomes for consumers.