Proposed Merger of Three UK and Vodafone

(Limited Text - Ministerial Extracts only)

Tuesday 19th September 2023 Westminster Hall

[The Minister for Data and Digital Infrastructure (Sir John Whittingdale)]

It is a pleasure to serve under your chairmanship this afternoon, Sir George. I congratulate the hon. Member for Stockport (Navendu Mishra) on securing the debate. It has been an interesting discussion. At times, I felt like I was listening to a display of Marxist economic analysis, but some important points have been raised. Unfortunately, I will not be able to address a lot of them in detail, because they relate to either the Competition and Markets Authority or national security. The hon. Member for Rhondda (Sir Chris Bryant) was correct to direct a lot of his concerns, particularly with respect to the impact on competition, to the CMA, which will obviously have to examine the potential merger. There is also a national security mechanism in place, as he will be aware.

I will make a few more remarks about that, but it gives me an opportunity to say something about the importance of mobile connectivity and 5G technology, which has enormous potential to transform public services and make our workplaces more effective, connecting healthcare workers, vehicles, traffic flows and so forth. We reckon that widespread adoption of 5G could bring £159 billion in productivity benefits across sectors by 2035. The Prime Minister has set out the UK’s ambition to be the leading science and technology superpower by 2030. If we are to achieve that aim, connectivity will play a critical role. To reach that point, we will rely heavily on investment by the mobile companies, and we are in regular dialogue with them.

As the hon. Member for Stockport knows, the deal that is on the table between Vodafone UK and Three UK will be subject to regulatory approvals. The debate has concentrated a lot on the potential national security implications, which I will talk about, and the impacts on competition. In general, the Government welcome investments into the UK that will support growth and jobs, meet our legal and regulatory requirements, and not compromise our national security, but as everybody who has participated in the debate has stressed, the security of critical national infrastructure is of prime importance.

The Government have a strong record on putting in place much tougher measures through such things as the National Security and Investment Act 2021 and the telecoms security legislation. Hon. Members will be aware of the actions that have been taken around Huawei and of the removal of its technology from the core network. The hon. Member for Rhondda referred to the target of achieving that by the end of 2027. I can tell him that we are on track, and only this week I announced further incentives to establish the open radio access network, which will increase the diversification of our telecoms supply market.

On competition, it is obviously a matter for the Competition and Markets Authority to assess the impact on both the market and consumers. The Government do not have a role in the decision, which will be taken by the Competition and Markets Authority. It is long established in competition policy that these matters are determined by an independent regulator.

The hon. Member for Stockport and others expressed concern about the potential impact on jobs. That is essentially a commercial matter for the company. Yes, Vodafone has announced the loss of 11,000 jobs globally over the next three years, and obviously that is a matter of regret. Those are difficult decisions, but they are commercial decisions for the company. There is no reason to believe that the merger will add to that number. Again, that will be taken into account in the examination of the case for the merger.

The hon. Gentleman referred to analysis by Unite the union on what happened when a similar merger took place in Australia. However, every market is different. We cannot extrapolate from what happened in Australia, where there were different timings, a different state of the market and different network providers, to reach conclusions about the impact here.

On price rises, we recognise that this is a difficult time for many people, who face significant challenges with the cost of living. I would like to take this opportunity to pay tribute to the mobile operators, including Three and Vodafone; they have done a lot to try to support consumers through these difficult times, not just during the rise in the cost of living, but throughout the pandemic, in particular by bringing forward social tariffs for those on low incomes, donating millions of gigabits of data to the National Databank and providing devices through the National Device Bank. That has offered real assistance to those finding it hardest to deal with the cost of connectivity, which, as has been recognised during this debate and previous ones, is no longer a luxury but an essential of modern life.

There are now 27 providers of social tariffs, with millions of households eligible. I would like to see greater take-up, and we are pursuing that by publicising eligibility for social tariffs to potential claimants. Strong competition in the mobile market has managed to keep prices in this country relatively low compared with many others, such as Italy, Germany, Spain, France and the USA. Consumers are beginning to see the benefits that 5G can offer.

I was intrigued that most speakers in the debate did not mention the state of coverage in their constituencies. That is possibly because it is estimated that 100% coverage has been achieved in Stockport, in Liverpool, Riverside, in Glasgow North West and in Birkenhead. That is not quite the case in the constituency of the hon. Member for Rhondda, but we are making good progress. He may dispute this, but the figures I have are that 92% of premises have 5G coverage from at least one mobile operator and that 72% of the land mass has coverage.

The one contributor to the debate who understandably and correctly raised his concern about the lack of coverage was the hon. Member for Strangford (Jim Shannon). We missed him the other day in a debate on broadband, but it is certainly the case that his constituency has a long way to go. The shared rural network programme we are undertaking will particularly benefit Northern Ireland, because the challenges there are especially great. I am happy to talk to him about what more we can do to roll out both broadband and mobile coverage in his constituency, but that means that we are beginning to see the benefits that 5G can offer, in particular given our ambition to achieve stand-alone 5G, which represents a big leap forward from non-stand-alone 5G. That will require considerable investment, which must be paid for.

We set out in the UK wireless infrastructure strategy our ambition for nationwide coverage of stand-alone 5G in all populated areas by 2030. That will extend high-quality 5G well beyond cities and larger towns to all populated areas of the UK. That will require investment of billions of pounds from the operators, at a difficult time, with rising inflation and energy costs. We have set out a number of measures to help operators to deliver that ambition. For example, Ofcom is reviewing the approach to setting spectrum licence fees, and we are working with it to update the net neutrality guidelines. Recently, I was able to announce the launch of our 5G innovation regions programme, which will invest up to £40 million to help local and regional authorities to realise the benefits of 5G and advanced wireless connectivity.

I will briefly return to the main concerns that were raised. The competition aspects are not ones over which the Government have any influence; they will be determined by the CMA. Obviously, the concerns raised during the debate will be on the record; hon. Members’ questions were entirely properly put, and the CMA will undoubtedly take them into account.

As I said, there is now an established procedure with respect to national security implications. The hon. Member for Rhondda was right to point to the role of the investment security unit, which now falls under the Cabinet Office, but several hon. Members—in particular the hon. Members for Birkenhead (Mick Whitley) and for Strangford—raised concerns about the lack of parliamentary involvement in the decision. National security issues have always been kept confidential, out of necessity, but we recognise that there needs to be some parliamentary oversight of economic security measures.

For that reason, in March this year the Government agreed a memorandum of understanding with the then BEIS Committee—now the Business and Trade Committee—setting out arrangements for parliamentary scrutiny of the operation of the NSI Act and the investment security unit. The memorandum establishes arrangements to allow the Committee to access the information it needs to fulfil its scrutiny role, and sets out key principles for how and when the Government and the Committee expect information to be shared and protected. The memorandum acknowledges that the Committee has a wealth of experience in scrutinising the operation of the Act, and we are keen to give it the information that it needs to carry out its work. The Intelligence and Security Committee has a separate role in monitoring the work of the intelligence agencies, and it is up to the ISC to look at whatever aspects of the work of the agencies it chooses.

I am sorry that I am unable to go into detail on a number of the issues raised by hon. Members, but I will at least recognise that the debate has provided an opportunity for them to be put on the record. I am sure that the questions raised, which are legitimate ones, will be properly taken into account when the merger is examined by the CMA, if it triggers the process under the National Security and Investment Act. I thank Members for their participation.