Mobile customers could face higher bills with Three and Vodafone merger, watchdog warns

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Mobile customers could pay higher prices if the merger between Three and Vodafone is allowed to go ahead, the competition watchdog has warned. 

In June 2023 Three and Vodafone announced plans to merge in a £15billion deal that would create the UK's largest mobile network.

But the Competition and Markets Authority is concerned that a shrinking market of providers could push up prices for all mobile phone customers - not just those of Vodafone and Three. 

Any mobile phone price hike would just compound steep bill increases of up to 7.9 per cent on airtime that are hitting customers from next month. 

Price panic: The competition watchdog thinks that reducing the number of UK mobile networks from four to three would mean less incentive for firms to keep prices down

The CMA said: 'The CMA is concerned the deal, which combines two of the four mobile network operators in the UK, could lead to mobile customers facing higher prices and reduced quality.

'The CMA is concerned that combining these two businesses will reduce rivalry between mobile operators to win new customers. Competitive pressure can help to keep prices low, as well as provide an important incentive for network operators to improve their services, including by investing in network quality.'

There are only four mobile networks in the UK - Vodafone, Three, O2 and EE.

Other mobile phone firms such as Sky Mobile, Lebara and Myca Mobile piggyback off the existing four networks to connect their customers.

The CMA thinks that reducing the number of mobile networks from four to three could have a disastrous effect on competition. 

The watchdog said it was concerned that the remaining mobile networks would have less incentive to keep prices low and invest in their services.

Vodafone and Three have five days to respond to the CMA before it launches a second, deeper investigation.

CMA decisionmaker Julie Bon 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. 

'Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in UK mobile networks. These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.' 

Airtime price rises 

Mobile phone users are already facing price hikes of up to 7.9 per cent on the airtime part of their bill.

These mid-contract increases are set to take place from March to May and will see many broadband and mobile firms pass on cost rises linked to inflation - often with an extra charge on top for good measure.

Most providers will base their price increases on December 2023 consumer prices index (CPI) inflation figure of 4 per cent.

The steepest price hikes so far this year are from EE, BT, Three and Vodafone, which will charge most customers a 7.9 per cent increase - inflation of 4 per cent plus an extra 3.9 per cent.

Regulator Ofcom is considering plans to ban these inflation-linked price increases from this summer, but not in time to stop this year's rises.