By Najat Kantouar


The U.K. competition regulator plans a further investigation into Vodafone Group's planned joint venture of its U.K. operations with Three U.K., saying the deal could leave consumers and businesses worse off.

The Competition and Markets Authority said Friday that the deal--which seeks to combine two of the four U.K. mobile network operators--could lead to higher prices for customers and impact investment in U.K. mobile networks.

The agreement would bring their 27 million customers under a new, single network provider and raises competition concerns, the CMA said.

"Whilst Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims," the CMA's Julie Bon said.

The deal would reduce rivalry between mobile operators to win new customers and make it difficult for smaller mobile virtual network operators such as Sky Mobile, Lebara and Lyca Mobile to negotiate good deals for their own customers, she said.

The regulator has given the companies five working days to respond with a solution, otherwise the deal will be referred to a more in-depth investigation, the regulator said.

Vodafone and Three UK said the investigation was an expected step in the process and that they are confident the transaction will deliver significant benefits for competition, customers and the country.

"We will review the potential concerns raised by the CMA and look forward to continuing to engage constructively with them as we set out the benefits of the merger for competition and for U.K. consumers and businesses," the companies said in a joint statement.

"The current market structure is holding the U.K. back, which is not good for customers or competition. By creating a third player with the necessary scale to invest, the combination of our two companies will deliver one of Europe's most advanced networks and move the U.K. into the digital fast lane, benefiting customers from Day One," Three UK Chief Executive Robert Finnegan said.

The regulator launched its initial investigation into the deal in January to determine whether or not it would lead to a substantial lessening of competition. The latest investigation will be undertaken by a panel of experts to review in greater depth the issues identified.

In June, Vodafone and CK Hutchison Holdings' Three agreed to merge their U.K. operations, valuing the new business at more than 7 billion pounds ($8.86 billion).

Under the deal, Vodafone will own 51% of the combined business with Hong Kong-listed CK Hutchinson owning the rest. There is no cash consideration.

If the deal is cleared, Vodafone UK's current Chief Executive Officer Ahmed Essam will become the combined business's CEO and Three UK's Chief Financial Officer Darren Purkis will become its CFO.

The combined business plans to invest GBP11 billion in the U.K. over 10 years, intending to create one of Europe's most advanced standalone 5G networks, the companies said in June.

"For Vodafone, this transaction is a game changer in our home market. This is a vote of confidence in the U.K. and its ambitions to be a centre for future technology," Vodafone Chief Executive Margherita Della Valle said at the time.

At 0834 GMT, Vodafone shares were up 1.1 pence, or 1.6%, at 68.6 pence. Over the past 12 months, shares are down 25%.


Write to Najat Kantouar at najat.kantouar@wsj.com


(END) Dow Jones Newswires

03-22-24 0501ET