Vodafone and VMO2 renew network sharing could help clear road for Vodafone–Three merger 


The deal includes a pledge for Vodafone to sell spectrum to Virgin Media O2 (VMO2) in order to ease regulatory fears over its merger with Three UK 

UK mobile operators Vodafone and VMO2 have agreed to extend and enhance an existing network sharing agreement for the next decade, a deal they say will boost the quality of network coverage across the UK. 

The agreement will mean that the two companies share certain aspects of their network infrastructure, allowing for enhanced service offerings while reducing costs related to overbuilding.  

According to the operators, this network sharing agreement will allow the two companies to compete more effectively with market leader BT (EE), by improving their network reach and service quality without proportionally increasing costs.  

The deal expands on an existing sharing agreement the two operators first struck back in 2012. 

But perhaps more interesting than the extension and expansion of this existing partnership is the deal’s implications for the proposed merger between Vodafone and Three UK.  

The £15 billion merger is currently under investigation by the Competition and Markets Authority (CMA), which is exploring whether the deal will hinder competition and drive up prices for consumers. One of the major roadblocks is the disproportionate share of spectrum that the newly merged entity will have versus its competitors.  

As part of today’s deal, VMO2 says it will agree to purchase spectrum from Vodafone to balance the scales, if the merger goes ahead. The exact amount of spectrum that would change hands – or the price that would be paid for it – was not specified. Nonetheless, VMO2 says the purchase should help them compete effectively in a tripartite mobile market and should help ease the competition concerns of the CMA. 

“With this agreement and our merger with Three, we will transform the mobile experience for over 50 million customers in the UK for the long-term, providing significant network improvements including more choice, better quality and greater coverage across the country,” said Ahmed Essam, CEO of European Markets at Vodafone in a press release. 

“The proposed merger, together with this agreement, will boost competition by establishing a strong third player in the UK mobile market and will improve the balance of spectrum holdings, levelling the playing field between the UK’s mobile operators,” he continued. 

“We are extending and bolstering elements of our existing network sharing arrangement, while also ensuring there is a robust, balanced and functional structure in place for the long-term should Vodafone and Three’s proposed merger gain consent. We believe that this new agreement addresses the issues we have voiced and the CMA outlined in its initial decision, and will now continue our engagement with the regulator in this spirit,” echoed Lutz Schüler, CEO of VMO2. 

Whether a spectrum sale would, in fact, help create a totally balanced spectrum environment remains unclear. For example, following the merger, Vodafone–Three and VMO2 combined would control roughly 80% of spectrum in the 3.5 GHz band crucial for providing 5G services. BT, with only the remaining 20%, could therefore find itself at a significant disadvantage versus competitors when it comes to 5G capacity.The CMA will publish a final report into its probe on 12 October. 

If the merger is ultimately approved, the MergeCo says it will spend £11 billion over the next ten years on network improvements.  

Join the conversation around the UK’s connectivity at this year’s Connected Britain, 11-12 September in London. Get tickets here!  

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Dutch operators finally get their hands on midband 5G spectrum
Virgin Media O2 completes first stage of Shared Rural Network
Xavier Niel’s $4.1 billion bid for Millicom is too low, company says

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