Vodafone / Three Merger: The competition law implications of starting a joint venture

On 5 December 2024, the UK Competition and Markets Authority (the CMA) unconditionally approved the creation of a joint venture (JV) combining Vodafone Group plc (Vodafone) and Three UK (Three) subject to behavioural remedies. On 28 March 2025, Vodafone and Three agreed to certain legally binding commitments signalling the end of the CMA’s investigation into the Vodafone / Three merger.

In this article, we highlight the significance of this decision and the implications for JV partners.

Significance of the decision

This is the first time the CMA has approved a transaction that would reduce the number of Mobile Network Operators (MNOs) – from four to three – based on behavioural remedies.

The decision aligns with recent messaging from the CMA highlighting the importance of competition as a driver of growth and innovation, realising the need for investment across the UK economy.

The Vodafone / Three merger is context specific, operating in a complicated and essential regulated market, but there are distinct points that can be read across from this decision for organisations looking to enter into JVs.

The regulatory framework

JVs can be assessed by the CMA for competition concerns under two distinct but overlapping frameworks:

The Enterprise Act 2002 (as amended by (the Digital Markets, Competition and Consumers Act (DMCCA) 2025): If two or more enterprises cease to be distinct, and either the business being taken over has a UK annual turnover of at least £100 million for mergers post 1 January 2025 (or £70 million if the merger occurred before 1 January 2025) or the combined businesses have at least a 25% share of any reasonable market. Where neither of these thresholds are met, the CMA can review the transaction under the new Hybrid / Acquirer Threshold. This is where neither of the turnover or share thresholds are met but where (a) one party (most likely the acquirer) has a “share of supply” in the UK (or a substantial part thereof) of at least 33% and UK turnover exceeding £350 million and (b) the other party (most likely the target) meets certain UK nexus criteria.
The Competition Act 1998: The CMA can investigate a merger where they believe it constitutes an anti-competitive agreement and, in some cases, if there are concerns regarding an abuse of a dominant position in the market.

The CMA’s primary test is whether the JV will result in a Substantial Lessening of Competition (SLC).

JVs can result in an SLC where it weakens rivalry to such an extent that customers would be harmed, for example by reducing product choice, reducing output or innovation, or because the JV could raise prices and profitably maintain them.

JVs may also raise national security issues under the National Security and Investment Act 2021, depending on the sector within which the JV operates. (But that’s for another article.)

Competition Concerns for JVs

Where the JV doesn’t result in two enterprises ceasing to be distinct, JV partners still need to be mindful of risks under the Competition Act 1998. In particular, the JV should not:

Allocate markets, customers, or fix prices.
Restrict output or innovation.
Impose non-compete or exclusivity clauses not strictly necessary for the operation of the JV (known as ancillary restraints.)

In the case of the Vodafone / Three Merger, the CMA acknowledged the efficiencies that the merger would have, including accelerating the deployment of 5G. However, the CMA was concerned of an SLC in two markets:

Retail Mobile Services, the reduction from four MNOs to three MNOs could lead to increased prices, poorer service quality and leave consumers with one less MNO to choose from. The CMA calculated that the merger could result in an annual cost of £216 million to the consumer (mainly through increased prices) without adequate remedies.
Wholesale Mobile Services, the CMA considered that wholesale services – particularly among Mobile Virtual Network Operators (MVNOs) including Tesco Mobile and Sky Mobile – would be harmed. Competitive wholesale terms are essential for MVNOs to operate and provide retail offerings to consumers.

The CMA were also concerned that Vodafone and Three would not follow through on their proposed plans to invest in the network post-merger, highlighting that it would be more profitable for the merged company to decommission sites in low and mid traffic areas, rather than proceed with their proposed investment programme.

The agreed remedies package

The CMA approved the JV subject to a behavioural remedies package agreed between the merging parties and supported by the sectoral regulator, the Office of Communications (Ofcom). These remedies are designed to address the CMA’s concerns regarding competition to ensure efficiencies and pro-consumer benefits are delivered.

These include the Vodafone/Three JV agreeing to:

A legally binding commitment to invest £11 billion in the network over the next eight years.
Price caps to protect consumers in the short term, agreeing to retain certain tariffs for at least three years.
Provide non-discriminatory terms to MVNOs, ensuring competitive wholesale pricing and network resourcing.
Provide annual reports to track progress against agreed milestones with ongoing monitoring to be conducted primarily by Ofcom. Failure to meet milestones might incur action by the CMA to extend protections or enforce additional measures on the parties.

How can JV partners mitigate competition concerns?

At the outset, JV partners should define the purpose of the JV and be precise as to the aims.
JV partners should be clear and specific about the pro-competitive goals and the limits of their JV.
JV partners should consider how the JV will benefit consumers.
Any efficiencies should be evidence backed where possible, and JV partners should consider the full extent of whether their aims are achievable without a JV.
JV partners should ensure that any reduction in competition is no more than is absolutely necessary to achieve their goals.
JV partners should not share sensitive information, unless it is absolutely necessary for the functioning of the JV. Care should be taken before sharing sensitive information and expert legal advice sought where there are concerns.

Conclusion

The Vodafone / Three merger highlights the importance of JVs to develop new technologies and drive economic growth, whilst exemplifying the new approach the CMA might take to assessing mergers. Engaging with the competition law risks at the outset can help you navigate the regulatory terrain when starting a JV.

If you are considering a JV, or have any JV related questions, please get in touch with our regulatory and competition team or our corporate finance team.

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