Vodafone says Three merger would be good for competitionVodafone says Three merger would be good for competition
Vodafone's Andrea Dona argued a strong third player is needed in the UK market to bolster competition, while BT's Howard Watson raised the question of spectrum during the Connected Britain trade show in London.
September 21, 2023
A merger between Vodafone and Three is necessary if the UK is to avoid a network duopoly, Vodafone's chief network officer, Andrea Donà, told the Connected Britain event in London this week.
He argued the merger would help to boost competition in the UK market, saying that the gap between telcos has become so large it is hindering competition. "It's actually a two-player market," he said. "By introducing a third challenger at scale, we can offer our customers more choice.
"What we don't want to happen is what we believe is happening now, when there is a gap between the leaders in the market and the second and the third place in the market – if the gap is big enough you could question whether people are becoming a bit complacent," he added.
Donà did not go into much detail on why Vodafone believes this is the case, or what constitutes the gap he is referring to. There is, however, some evidence pointing to a divide, at least when it comes to return on capital. According to Ofcom data, neither Vodafone nor Three has covered its cost of capital since 2018, while the other two operators appear to be in a more comfortable position.
Later on, BT's chief security and networks officer, Howard Watson, pushed back against this notion, saying: "When I look at how we compete out there, we don't see a duopoly at all."
Dona insisted that Vodafone has neither the capital nor investment muscle to reach rural areas and increase coverage of current "not-spots." By 2034, he said, the merged company could cover nearly all of the UK population with 5G standalone. This is part of the £11 billion (US$13.65 billion) investment plan Vodafone and Three say will be put in place if the merger is allowed to go through.
Commenting on Donà's claims, Gabriel Brown, principal analyst at Heavy Reading, said in emailed remarks to Light Reading: "Vodafone and 3UK are very disciplined in their messaging. Lots of terms like 'investment muscle' and references to rural coverage. But they're not conceding anything at all on so-called remedies, even though we all know they're coming."
Asked on stage about the implications of the merger for pricing, Donà said Vodafone's strategy would not change as a result of the deal. He stressed that the new entity would maintain a presence in the flexible, lower-value SIM-only market. Additional investment will lead to a "much-needed uplift in the network," he said, arguing that "postpaid customers will benefit from that and as a result pay for that."
Watson acknowledged there could be some benefits, given the experience in other markets. "In some countries, moving from four players to three players has made capital investment more efficient," he said.
He did, however, say there are some questions for the Competition and Markets Authority to address, raising the topic of spectrum in particular. After a merger, Vodafone and Three would together hold 49% of the available resources across all bands.
Brown said: "It was interesting that Howard Watson took the trouble to make clear that BT would try and get the regulators to include spectrum remedies in any approval."
He added: "The merger would be an okay outcome for BT in the short/medium term. It could get new spectrum, one less competitor, and avoid the headache from having to integrate two companies, so I doubt they'll be too obstructive."
It will, however, likely be a while before the industry knows the CMA's decision.
About the Author(s)
You May Also Like
5G Network Automation and AI at Global Megaevents: A Telco AI-at-scale case study with Ooredoo and EricssonOct 10, 2023
5G Transport & Networking Strategies Digital Symposium.Oct 26, 2023
Improve Service Efficiency in the Call Center and Field with Slack AutomationOct 13, 2023
Open RAN Evolution Digital Symposium Day 1Jul 26, 2023