Fatal blow to the MVNOs
UK mobile network operators Vodafone and CK Hutchison-owned Three UK are allegedly so close to agreement on a £15bn merger that Bloomberg has predicted an announcement before April 1, 2023. However, there are already rumours that this is no ordinary pact, but for some creatives with ambitions to invent new services through virtual networking, this could be a merger most foul.
The operators have reportedly been in talks about how to pool resources compete with their aggregated rivals at BT–EE, and Virgin Media O2 (VMO2) both of which comprise a fixed line and mobile operator. However, the Vodafone-Three UK union is a fusion of two mobile operators, a market consolidation that could be raise competition and regulator questions, since it shrinks consumer choice from four to three and significantly affects the dynamics of the wholesale market’s offering to the mobile virtual network operator sector. At Mobile World Congress 2023 in Barcelona, the emerging MVNO sector was presented as the telecoms industries most vibrant creative workshop, since these small players are both dynamic and decisive in comparison to the general moribund culture of big telcos.
In the past, Ofcom has tended to object to big mobile-only mergers, partly because of its duty to protect consumer and wholesale (MVNO) competition. However it was relieved on that burden by 2020 ruling by the European Court of Justice which argued that a market of three does not necessarily make an oligopoly.
Our regulator seems to have softened its stance on such mergers, said analyst Mark Jackson in ISP Review. The complexity of unpicking existing network sharing agreements between O2 and Vodafone and the pact between Three UK and EE would be daunting. As would questions over how much radio spectrum the merged company would be allowed to retain and how much the new ‘VodaThree’ would have to redistribute to rivals.
Another integration challenge is that Three UK and its related MVNOs Smarty and iD Mobile have historically been low-cost brands, while Vodafone goes for premium in its pricing. Vodafone’s own MVNO brand, VOXI, tried to address the lower orders but it will need to go much further in order to match Three UK’s approach, said Jackson.
The approval of the Voda/Three merger is likely to hinge on the concessions and commitments the parties are willing to give in order to gain regulatory approval, said Jackson.