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The plan to merge Vodafone and Three should concern the government

4 min read

The proposed merger of Vodafone and Three UK could have worrying implications for bills, jobs and national security. The government should think carefully about the consequences.

Vodafone has not been shy of making big promises ahead of its proposed merger with Three UK. Vodafone CEO Margherita Della Valle says the merger will be "great for customers, great for the country and great for competition".

The Competition and Markets Authority (CMA) appears to disagree. Last week it published its Phase One report into the proposed merger, and the report makes for worrying reading. The CMA says the merger may "lead to higher retail mobile prices for consumers and businesses", major operators "investing less in network quality" and "would eliminate competition between two major players".

It’s difficult to see what promises can address the legitimate concerns raised over rising bills and lessening competition. This is a bad deal for the British people. Vodafone and Three UK only have the rest of this week to address the regulator’s concerns and prevent a more in-depth Phase Two investigation. 

As a member of the Business and Trade Committee, and the sub-committee on national security and investment, there are other factors I must consider that fall outside of the CMA’s remit, but are no less concerning. These include the serious implications for our national security, and for jobs. 

Vodafone holds an array of key government contracts, including with the Ministry of Defence, Ministry of Justice, and the NHS. The Cabinet Office has already identified the 14.6 per cent stake held in Vodafone by UAE-backed e& as a national security risk. Debate also continues around a proposed takeover of the Telegraph by the UAE. What must the government therefore make of Three UK’s Hong Kong backers, and the fact that, if the merger is approved, the UK’s largest mobile network operator will be 49 per cent owned by a Hong Kong company with links to the Chinese Communist Party? 

China is back in the news following a series of concerning developments. The Deputy Prime Minister has announced that several MPs and peers have been targeted in cyber-attacks, while further attacks which accessed the personal data of forty million voters in August 2021 are also linked to China. This news comes hot on the heels of the US House of Representatives voting on a Bill to ban TikTok in America over concerns of election interference, and all of this just four years after the government ordered the removal of all Huawei technology from UK telecoms infrastructure. 

The passage last week of Hong Kong’s new draconian security law, Article 23, has cast further doubt on its separation from Beijing. The Bill sees China’s definition of national security greatly expanded to cover ‘major interests of the state’. Law firm Latham and Watkins have subsequently prohibited lawyers based in Hong Kong from accessing international databases, and two of the world’s biggest audit firms, Deloitte and KPMG, have instructed US-based staff to use burner phones when visiting Hong Kong. 

In this context, I simply cannot see what the justification is for putting key government information and the data of tens of millions of British citizens within reach of the CCP. I hope the government will think carefully about referring this merger to the NSIA to further consider the very serious implications it poses to our national security. 

It’s right that we strive to ensure the UK is seen as an attractive place to invest, but this cannot come at an unacceptable cost to security, jobs, and people’s bills. 

We’ve got a good comparison overseas as well, where Vodafone and Three have already merged, allowing us to see what happened to the market. Prices rose by as much as 25 per cent. Investment fell by 45 per cent, yet corporate dividends increased by a whopping 2,700 per cent. At a time when households are feeling the pinch, can Vodafone and Three guarantee this won’t happen here?

And, with 80 per cent of Vodafone’s customer service based off-shore, and with the company already announcing 11,000 job cuts over the next three years, I wonder how many of those will be UK workers? Unite the Union estimates 1,600 UK jobs could be lost. Vodafone and Three must provide answers. 

The mobile market in the UK already offers competition and value for money. I hope the CMA and government will focus on maintaining that competitive environment, protecting consumers and ensuring any deal preserves the UK’s national security. 

Charlotte Nichols is the Labour MP for Warrington North.

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