UK regulator finds Vodafone and Three merger would lead to price rises, seeks remedies for deal
Britain’s competition watchdog on Friday said it found competition concerns with the proposed merger between Vodafone and the Three UK mobile network owned by CK Hutchison.
The U.K. Competition and Markets Authority (CMA) said the deal would lead to price increases for tens of millions of customers or see some users get reduced services. The regulator also warned of a negative impact for so-called Mobile Virtual Network Operators (MVNOs), which piggyback on existing infrastructure.
“The CMA has provisionally concluded that the merger would lead to a substantial lessening of competition in the UK – in both retail and wholesale mobile markets,” the regulator said in a press release.
Vodafone and CK Hutchison’s transaction, which was announced last year, would merge the two brands’ U.K. businesses, giving Vodafone a 51% controlling stake and leaving CK Hutchison with the minority interest.
But the CMA opened an antitrust probe in to the deal in January and announced an in-depth investigation in April.
The regulator said Friday the merger would result in higher prices or reduced services, and could “negatively affect those customers least able to afford mobile services.”
Vodafone and Three U.K.’s merger would also reduce the number of major telecommunications network players from four to three, the regulator said, adding that this could make it harder for MVNOs to secure competitive deals which may reduce their ability to offer competitive rates to customers.
The CMA did however recognize that the deal “could improve the quality of mobile networks and bring forward the deployment of next generation 5G networks and services,” which the two merging networks have claimed.
However, the CMA said those claims could be “overstated” and that the merged firm would “not necessarily have the incentive to follow through on its proposed investment programme after the merger.”
The CMA has not blocked the deal.
Vodafone response
Vodafone said that the merged entity will invest £11 billion ($14.46 billion) into U.K. telecommunications infrastructure.
“It delivers massive benefits for consumers, in towns, in cities, across the country,” Ahmed Essam, CEO of European markets for Vodafone, told CNBC’s “Squawk Box Europe” on Friday.
Vodafone has argued that the U.K.’s digital infrastructure continues to lag behind other major economies and that its investment would help boost areas like next-generation 5G networks and broader coverage to more parts of the country.
Vodafone said in a separate statement Friday that it disagrees with the findings that the merger would lead to price increases for consumers. The merger would not affect its pricing strategy and that there would be enhanced competition between MVNOs, the firm said.
“I think every consumer in the U.K. today recognizes that there are not only four players … there are more than a hundred players in the market offering a lot of offers. And with this merger, we bring a third scaled quality network that is able to compete and drive better outcomes for customers,” Essam said.
What’s next?
The CMA said it will now consult on the provisional findings and potential solutions to its competition concerns, including remedies. These could include legally binding investment commitments and measures to protect both retail and wholesale customers.
The CMA could block the merger if its concerns are not addressed, the regulator said.
Essam said Vodafone is ready to make its promise of £11 billion in infrastructure investment legally binding and roll it out at the pace it has promised.
“We work closely with the CMA … they are provisional findings meaning that we work with the CMA over the coming three months to address any of their concerns,” Essam said.
The CMA will issue its final report by Dec. 7 this year.
Technology
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Intuit CEO Sasan Goodarzi speaks at the opening night of the Intuit Dome in Los Angeles on Aug. 15, 2024.
Rodin Eckenroth | Filmmagic | Getty Images
Intuit shares fell 6% in extended trading Thursday after the finance software maker issued a revenue forecast for the current quarter that trailed analysts’ estimates due to some sales being delayed.
Here’s how the company performed in comparison with LSEG consensus:
- Earnings per share: $2.50 adjusted vs. $2.35 expected
- Revenue: $3.28 billion vs. $3.14 billion
Revenue increased 10% year over year in the quarter, which ended Oct. 31, according to a statement. Net income fell to $197 million, or 70 cents per share, from $241 million, or 85 cents per share, a year ago.
While results for the fiscal first quarter topped estimates, second-quarter guidance was light. Intuit said it anticipates a single-digit decline in revenue from the consumer segment because of promotional changes for the TurboTax desktop software in retail environments. While that will affect revenue timing, it won’t have any impact on the full 2025 fiscal year.
Intuit called for second-quarter earnings of $2.55 to $2.61 per share, with $3.81 billion to $3.85 billion in revenue. The consensus from LSEG was $3.20 per share and $3.87 billion in revenue.
For the full year, Intuit expects $19.16 to $19.36 in adjusted earnings per share on $18.16 billion to $18.35 billion in revenue. That implies revenue growth of between 12% and 13%. Analysts polled by LSEG were looking for $19.33 in adjusted earnings per share and $18.26 billion in revenue.
Revenue from Intuit’s global business solutions group came in at $2.5 billion in the first quarter. The figure was up 9% and in line with estimates, according to StreetAccount. Formerly known as the small business and self-employed segment, the group includes Mailchimp, QuickBooks, small business financing and merchant payment processing.
“We are seeing good progress serving mid-market customers in MailChimp, but are seeing higher churn from smaller customers,” Sandeep Aujla, Intuit’s finance chief, said on a conference call with analysts. “We are addressing this by making product enhancements and driving feature discoverability and adoption to improve first-time use and customer retention.”
Better outcomes are a few quarters away, Aujla said.
CreditKarma revenue came in at $524 million, above StreetAccount’s $430 million consensus.
At Thursday’s close, Intuit shares were up about 9% so far in 2024, while the S&P 500 has gained almost 25% in the same period.
On Tuesday Intuit shares slipped 5% after The Washington Post said President-elect Donald Trump’s proposed “Department of Government Efficiency” had discussed developing a mobile app for federal income tax filing. But a mobile app for submitting returns from Intuit is “already available to all Americans,” CEO Sasan Goodarzi told CNBC’s Jon Fortt.
Goodarzi said on CNBC that he’s personally communicating with leaders of the incoming presidential administration.
On the earnings call, Goodarzi sounded optimistic about the economy.
“Our belief, which is not baked into our guidance, is that we will see an improved environment as we look ahead in 2025, particularly just with some of the things that I mentioned earlier around just interest rates, jobs, the regulatory environment,” he said. “These things have a real burden on businesses. And we believe that a better future is to come.”
WATCH: H&R Block, Intuit shares fall after report Trump administration is considering a free tax-filing app
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