Britain signals route to Vodafone-Three UK clearance
CMA says deal could push up bills
But adds it could improve network quality, speed up 5G
To make final decision on deal in December
Companies disagree deal raises competition concerns
Rewrites paragraph 1, adds Vodafone CEO quotes in 10-12
By Paul Sandle
LONDON, Sept 12 (Reuters) -Vodafone's VOD.L merger with Three UK could win regulatory approval if they can guarantee the $19 billion deal will be good for consumers, network quality and competitors like Sky Mobile, Britain's competition watchdog signalled on Friday.
The Competition and Markets Authority (CMA) stuck to its view that moving from four national networks to three could push up bills for millions in its provisional findings.
But it added the deal could improve networks and speed up the switch to next generation 5G, adding it would examine solutions before making a final decision in December.
The tie-up, announced 15 months ago between Vodafone and Three UK, owned by Hong Kong's CK Hutchison 0001.HK, has challenged the regulator's previous stance that four networks are required to keep prices low.
Both operators have argued the deal would create a stronger third player that could compete more effectively with market leaders BT's EE and Virgin Media O2.
"We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments," CMA inquiry chair Stuart McIntosh said.
Vodafone and Three said they disagreed with the view that the deal raised competition concerns and could lead to price rises for customers.
"This is not a final decision, and we look forward to working with the CMA to secure approval," they said in a joint statement.
CAST IRON COMMITMENT
Vodafone Chief Executive Margherita Della Valle said she was confident the two companies could address the CMA's concerns.
The CMA said it could still block the deal or make the companies divest mobile assets or spectrum - so-called structural remedies - but such a step would remove or reduce any benefits.
"I think it's fair to say that the CMA all but rules out this type of structural remedies," Della Valle told reporters.
Barclays analysts said the remedies suggested by the CMA looked "broadly manageable".
The CMA said it could require a commitment on network investment and protection for customers, such as allowing them to "roll over" their existing terms for a period.
In the wholesale market, it said pre-agreed terms could be made available to third-party providers such as Lyca Mobile, Sky Mobile and Lebara.
Those providers, which currently mainly use EE's and O2's networks, could also have a chunk of the merged company's capacity ring-fenced, it added.
Della Valle said the two companies' plan to invest 11 billion pounds in networks was a "cast iron commitment", while consumer prices would either go down or be flat because a merged network would be good for wholesale competition.
Shares in Vodafone were up 1% in early deals.
Reporting by Paul Sandle in London and Prerna Bedi and Yadarisa Shabong in Bengaluru; Editing by Rashmi Aich and Mark Potter
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