Will CMA Concerns About VOD's Merger With Three UK Affect the Stock?
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The Competition and Markets Authority (“CMA”) – the U.K.’s competition watchdog – has raised concerns about the proposed ￡15 billion Vodafone Group Public Limited Company’s VOD merger with Three UK. The agreement is likely to create the largest mobile network in the U.K., with more than 27 million customers, reducing the number of mobile operators from four to three.
In its provisional findings, the CMA has observed that the deal could disrupt the competitive market and potentially harm customers by raising mobile bills between 3% and 6%. Moreover, the competition regulator anticipates that the deal could result in consumers facing poorer services, such as smaller data packages in their contracts, while adversely impacting mobile virtual network operators that depend on larger rivals’ networks to provide their service.
What Lies Ahead for VOD’s Blockbuster Deal?
Although the industry watchdog opined that the merger could harm fair competition in both the retail and wholesale markets, it could unlock potential opportunities to improve network quality and speed up the deployment of next-generation 5G technology. Consequently, the regulator aims to seek probable solutions to its concerns before making a final decision on the legitimacy of the deal in December.
Both the company spokespersons have disagreed with the current findings and have vouched to work in unison to encourage fair competition through commitments to network investment for improved service and network capabilities.
VOD Focusing on Enhanced Network Efficiency
Vodafone is striving hard to improve network efficiency to cater to the exponential growth in data traffic. The company has joined forces with Meta Platforms Inc. META to optimize the delivery of short-form videos and ensure efficient utilization of existing network infrastructure. Meta has made improvements to its video engineering and infrastructure deployment systems for more efficient video delivery. Vodafone has successfully freed up network capacity at key 4G and 5G sites in high-traffic areas like shopping centers and transport hubs. Implementing these optimizations across Vodafone has boosted network efficiency in the European markets without compromising the viewing experience.
Impact of CMA Findings on VOD Stock
The recent CMA findings failed to dent investor confidence, with the share price rising 1.4% to close at $10.17 last Friday after the public disclosure. It remains to be seen if the stock can maintain its growth momentum as the final report is awaited later this year.
The stock has gained 18.1% over the past six months compared with the industry’s growth of 3.1%.
