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The U.K. Competition and Markets Authority (CMA) announced an extension of the statutory inquiry period for the merger
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Three UK parent CK Hutchison failed to submit certain information on time
- The U.K. government recently cleared the merger on national security grounds
The proposed merger of Three UK and Vodafone UK took a significant step forward in recent days after it was cleared by the U.K. government on national security grounds, although with conditions attached.
However, the day after the government published its final order following a detailed national security assessment, the U.K. Competition and Markets Authority (CMA), which is responsible for investigating the merger on antitrust grounds, essentially stopped the clock on its own in-depth merger process.
In a statement on May 10, the CMA said it decided to extend the inquiry period, which currently has a statutory deadline of Sept. 18, 2024, because Three UK's parent company CK Hutchison failed to provide certain documents and information by May 9.
It appears, therefore, that the CMA’s phase 2 investigation has effectively been put on hold until CK Hutchison complies with its requirements, or the CMA otherwise decides to cancel the extension.
The story so far
The CMA announced on April 4 that it had referred the proposed merger of Three UK and Vodafone UK for a more in-depth investigation after the two operators apparently refused to commit to undertakings that may have eased the regulatory process.
The investigation was due to take at least 24 weeks up to the decision deadline of Sept. 18. The inquiry can also be extended once, by up to eight weeks, if the CMA considers there are special reasons why a final report cannot be prepared and published within the original “reference period” of the inquiry.
However, under section 39(4) of the U.K. Enterprise Act 2002, the CMA also has the option of extending the statutory timetable or “stopping the clock” if one of the relevant parties fails to comply with a notice issued under section 109 of the act. For example, if the clock were stopped for four days, the inquiry statutory deadline would change from Sept. 18 to Sept. 22.
Of course the clock could be restarted at any time, depending on the response from CK Hutchison, or a change of heart at the CMA.
According to a statement from Three UK, “CK Hutchison confirms receipt of the CMA’s extension notice and will be providing the requested information within the coming days.”
As noted by Kester Mann, an analyst with CCS Insight, the CMA’s move suggests there could be a minor delay in the overall process that could push the deadline closer towards the end of September.
“Of course, in addition to the eight-week permitted extension, there is also the possibility that the process takes even longer if negotiations with third-parties are required to remedy CMA concerns. This is what happened with the Orange and MasMovil merger in Spain, as discussions with rival Digi continued,” Mann added.
Last week, Three UK and Vodafone UK said they are “continuing to engage collaboratively” with the CMA to “inform its ongoing review of our merger, which we strongly believe will strengthen competition in the U.K.’s mobile sector and enable a significant step-up in the U.K.’s mobile network infrastructure.”
During the presentation of Three UK’s first quarter results for 2024, CEO Robert Finnegan also reiterated his belief that “merging with Vodafone is vital to give us the required scale to invest, grow and compete to create a best-in-class network for the U.K.”
Security green light
The good news for the two wannabe merger partners is that their proposed joint venture has been approved by the U.K. government under the National Security and Investment Act (NSIA).
However, approval is subject to certain conditions that the merged entity would have to implement in order to mitigate perceived risks to national security.
For example, it would establish its own national security committee to oversee any sensitive work, and a technical group within that committee would then provide updates and information to the government.
The proposed transaction initially triggered an investigation under the NSIA because of Vodafone’s role as a strategic supplier of services to many parts of the government.
In addition, there are concerns about the security of networks and data “resulting from the process of merging two large, complex organizations and their respective staffing, policies, processes and networks," according to the CMA.