VODAFONE

Question 1

What deals has Slaughter and May advised Vodafone on?

Answer 1

Slaughter and May advised Vodafone on its £15bn merger with Three.

Vodafone will own 51% of the combined business and CK Hutchison (Three’s parent company) 49%.

The merger will create one of Europe’s leading 5G networks with 27 million combined subscribers.

It will also consolidate the UK’s mobile market from four operators (EE, O2, Three and Vodafone) to three.

Question 2

Where is the Vodafone merger currently?

Answer 2

The UK government approved the merger in May, subject to both companies setting up a National Security Committee to oversee sensitive work that could affect national security given CK Hutchison perceived ties to China giving rise to potential risks of accessing sensitive national infrastructure or govt contracts.

The CMA is currently undertaking a Phase 2 investigation into the deal, which will run until September 2024.

This is due to the risks that mobile customers could face higher prices and reduced quality.

Question 3

Does the Vodafone/Three merger lessen competition?

Answer 3

Yes -

• Three and Vodafone already increased costs by 7.9%
• BT and Unite the Union have argued that it will make it harder for operators to compete and lead to a loss of jobs
• The merger will lead to greater market share for the combined entity in the UK and Western European mobile markets

No

• By consolidating, the two operators will be able to attain the necessary scale for expanding their network infrastructure
• Given it will create one of Europe’s leading 5G networks, the deal will create improved 5G coverage, especially in underserved areas

Question 4

What mergers may the CMA review?

Answer 4

Where two or more entities cease to be distinct; or

Either the UK turnover of the acquired enterprise exceeds £70mn or the two enterprises enjoy at least 25% market share and the merger will increase that share

Question 5

Is a company required to notify the CMA before a merger?

Answer 5

No, the UK operates a voluntary merger notification regime.

However, it is beneficial for firms to notify the CMA for three reasons:

• Legal risks - CMA can undo a merger and impose restrictions to prevent businesses from taking actions
• Financial risks - costs can arise from having to dispose or undo the merger

Question 6

What is the merger review process?

Answer 6

Phase 1 - CMA determines whether it believes the merger results in a realistic prospect of SLC

Phase 2 - launch an in-depth assessment

Question 7

What is considered SLC?

Answer 7

Involves:
- Raising prices
- Worse quality products or services
- Reduced innovation efforts
- Foreclosure of rivals