Specifically, BT is concerned that a merged Vodafone/Three will own a disproportionate share of capacity and spectrum compared to the other two MNO’s left in the UK market.
BT is also concerned about investment in its network-sharing joint venture with Three, Mobile Broadband Network Limited (MBNL).
It argues that the combined Vodafone/Three entity would have access to commercially sensitive information relating to BT's investment plans.
Spectrum Asymmetry
BT claims that the combined entity will own over 61% of UK mobile network capacity, which it calculates by combining spectrum and cell sites.
This, it says, creates a spectrum asymmetry between the merged entity, itself and VMO2 (the UK’s other MNO), that is unprecedented in both the UK and the EU.
In its response to the issue statement, BT urged the CMA to further investigate the impact of this spectrum discrepancy in its more detailed phase 2 investigation.
However, most industry commentators seem to think that some form of concession in terms of mobile spectrum is likely anyway if a deal is to be waved through, akin to the merger between Orange and MasMovil in Spain this year.
Vodafone and Three have argued since the merger was first announced that they are both operating at below their cost of capital, and as such are sub-scale compared to VMO2 and BT.
As a result, they are argue they cannot adequately invest in their respective networks, specifically when it comes to investing in rolling out 5G and 5G SA across the UK.
BT however argue that a tie-up pushes the balance too far in the other direction.
With no concessions mandated, the merged entity would hold 67% of 3.5GHz spectrum, which is key to deploying high capacity 5G networks.
It would also hold nearly 70% of low band spectrum, which is important for deploying indoor and wide area outdoor connectivity in 4G and 5G networks, while also supporting connectivity for industry, road and rail coverage and future IoT applications.
As a result, BT say that investments from itself and VMO2 that would have been commercially viable pre-merger would no longer be justifiable.
The spectrum asymmetry would be so great in fact that the merged entity would be able to invest a portion of its excess capacity in its own network while still hoarding additional spectrum and disincentivising investment from BT and VMO2.
Access to sensitive information
The CMA’s phase 1 investigation concluded that the merged entity’s access to BT’s commercially sensitive information via MBNL will likely result in lower levels of investment, a claim that BT agree with.
In addition to the MBNL, the UK is home to an additional network sharing joint venture between VMO2 and Vodafone, Cornerstone.
BT is concerned that the merged entity’s participation in both joint ventures would give them access to the network upgrade plans of both their competitors, despite safeguards being in place.
“If the merged entity became aware that both rivals are unlikely to make certain investments, it would no longer need to do so,” says the response.
In addition, BT and VMO2’s incentives to invest are reduced too, BT says.
However an industry analyst Capacity spoke to points out that operators have been rolling out their 5G networks on a more unilateral basis recently, with the shared network companies taking more a back seat.
“The implications of access to both shared networks were a major concern during the proposed 2016 merger between Three and O2,” they told Capacity. “Since then, they have become less integral to the mobile market landscape.”
Nevertheless, BT has focused its attention on the network sharing deal, and amplified concerns from the CMA that a merged Vodafone/Three would have the means and incentive to disrupt the agreement.
In addition to the issue statement responses, the CMA today published the initial merger application from Vodafone and Three.
Capacity will follow this story as it develops.
