Three and Vodafone: We need to merge because our networks are rubbish

Voda users have to fall back to 2G in some places after 3G switchoff, docs claim

Vodafone and Three UK are desperately trying to convince Britain's competition regulator to approve their merger, going so far as to denigrate their own network services - at least in some regions - as outdated.

Last month, the Competition and Markets Authority (CMA) published provisional findings from its investigation into the proposed £11 billion ($14 billion) union of Britain's third and fourth largest cellular operators.

It raised two major concerns: that consolidation would result in increased prices for users, and the post-merger company might not have an incentive to follow through on its proposed investment program to deliver network upgrades.

Last week, the pair published a response which rebuts all the CMA's points and naturally - as we reported at the time - argues against the regulator imposing any kind of commitments or remedies.

The Reg has now trawled that monster 94-page missive, so our dear readers don't have to, and found some claims of note. One of the arguments deployed is that the merger is necessary due to the dire state of the UK's mobile networks, with Voda (VUK) and Three citing their own infrastructure as examples.

"3UK's network still relies on 3G in a material part of the country and VUK still relies on 2G where it does not have 4G. For 3UK, only 73.03 percent of rural premises in the UK have 4G coverage, decreasing to 69.26 percent for Wales. For Vodafone, only 77.34 percent of rural premises in the UK have 4G coverage, decreasing to 71.58 percent in Wales," the document bemoans.

"Outside these areas, 3UK users rely on 3G, and Vodafone users have to fall back to 2G to have any connectivity at all, following the switch-off of the Vodafone 3G network."

Voda completed the 3G switch-off in February, a move that it said at the time had liberated frequencies to improve 4G and 5G services, claiming this would allow customers across more of the UK to have access to faster data services and enjoy "clearer voice calls". That's obviously not going so well, according to the 94-page document.

The mobile operators are not the only ones to employ tangled or questionable arguments in an attempt to fox the regulators. Last month, Amazon claimed its AWS cloud platform is facing stiff competition from customers moving workloads back on-premises. This came as part of its response to the CMA's probe into whether the big cloud players are limiting UK customers' choice in the local cloud market.

Software giant Microsoft took a different tack in its tussle to have its takeover of games developer Activision Blizzard approved, huffily claiming that the CMA decision to block the move demonstrated "a flawed understanding of the market," and that "despite all its rhetoric, the UK is clearly closed for business."

Three and Vodafone's assertions didn't finish with trashing parts of their network. They reckon the conjoined VodaThree will be capable of rolling out 5G Standalone (5G SA) network support which extends to 97.6 percent UK geographic coverage... by financial year 2032.

5G SA means infrastructure purpose-built to deliver 5G services, rather than the current situation where most UK mobile operators have 5G radios fitted to existing networks designed for 4G.

The duo also loftily suggest that if their merger is blocked by the regulator, the UK might not actually ever see a full 5G SA network.

"It is possible that, absent the Transaction, these scaled benefits would never be realised in the UK," the document states. "This is due to the lack of investment competition that exists in the UK today, with BTEE and VMO2 generating the lion's share of mobile industry cashflows and profits, and being the only parties with the scale (but not currently the incentive) to invest what would be required to enable high-capacity Advanced 5G," the pair claim.

Neither are Voda and Three happy with the idea of the CMA imposing any kind of retail customer protections, even if they are time-limited, saying these would have to be carefully considered to preserve the "substantial" customer benefits expected from the merger.

Additional safeguarding wouldn't be required, they argue, because market consolidation means the three remanining mobile operators would be "incentivized to compete even more strongly".

Possible retail customer protections might extend to a freeze on price increases and require the networks to maintain certain levels of service. Last week VodaThree pledged to maintain social tariffs at £10 or below for at least two years after the merger.

"However," as the document adds "inevitably, freezing prices and maintaining social tariffs will have some impact on the revenue generated by MergeCo and its ability to invest in its network."

Three and Voda did point out, though: "Failure to meet the thresholds set out for urban or rural areas in any of Years 4 and 8 would be a breach of MergeCo's spectrum licenses.'

The potential sanctions for this could see Ofcom impose a financial penalty of up to 10 percent of relevant annual gross revenue, or even revoke or alter the company's spectrum license. ®