UK regulator says $19 billion Vodafone-Three tie-up likely to go ahead

By Sarah Young and Kate Holton

LONDON (Reuters) - The $19 billion merger between Vodafone and Hutchison's Three UK is likely to be given the regulatory green light as Britain's need for investment outweighs short-term competition concerns.

Britain's anti-trust regulator said on Tuesday it believed the combination of the country's third and fourth biggest mobile operators could be "pro-competitive" if certain measures and remedies are implemented.

The provisional ruling marks a change of tone, being contrary to the regulator's long held tenet that at least four operators are required to keep prices low for consumers. A separate merger was blocked for that reason nine years ago.

The announcement comes weeks after Britain's new Labour government told investors that under its watch regulators would approve deals and corporate plans if they boost investment in infrastructure and public services.

According to analytics group OpenSignal, Britain ranks 22nd out of 25 European countries for 5G availability and download speeds, and has the slowest data download speeds in the G7 - potentially a big disadvantage as economies become more digitised.

When they announced the deal in June 2023, Vodafone and Three UK, owned by Hong Kong's CK Hutchison, pledged to invest 11 billion pounds in their joint network to roll-out 5G, a level of spending they said would not be possible if they did not join forces.

They also argued that the deal would create a stronger third player to compete with BT's EE and Virgin Media O2.

Britain's Competition and Markets Authority (CMA) said on Tuesday the deal could proceed if the remedies it recommends are implemented, including a legally binding commitment for the companies to invest in 5G plus short term customer protections.

In response, Vodafone and Three said there was now a "path to final clearance".

"The merger is a once-in-a-generation opportunity to transform the UK’s digital infrastructure – which lags significantly behind its European peers," they said in a joint statement.

The CMA is due to make a final decision on or before Dec. 7.

In 2015, when Britain was in the European Union, Hutchison tried to buy Telefonica's O2 network but the deal - already opposed by UK telecoms regulator Ofcom - was also blocked by the European Commission on the grounds it would hit competition.

(Reporting by Kate Holton; Editing by Sarah Young and Mark Potter)