Three and Vodafone: Potential Merger

Chris Evans Excerpts

Thursday 14th December 2023 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

I thank the Backbench Business Committee for granting time for this debate. In particular, I pay tribute to my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) for raising this issue and for his work as the new Chair of the Business and Trade Committee. I want to add my congratulations to him, however belatedly, on his appointment. He gave a comprehensive outline of the security implications of the proposed merger.

We had a comprehensive intervention from the right hon. Member for New Forest East (Sir Julian Lewis), my fellow Welshman. Whenever he speaks, we should all listen. He speaks with some authority, as both the Chair of the Intelligence and Security Committee and a distinguished former Chair of the Defence Committee.

The hon. Member for West Dorset (Chris Loder) raised some important points about rural broadband connectivity and his frustrations with companies and the regulator, which many of us share.

My hon. Friend the Member for Stockport (Navendu Mishra), mentioned some quite shocking statistics. Some 2.2 million households are struggling with mobile coverage, while in Greater Manchester—which he represents and speaks so passionately about—1.2 million people are facing digital exclusion, which is something we should all be concerned about.

There can be no doubt that the proposed merger between Three and Vodafone is not without controversy, as we have heard. We are often quite rightly chided when we throw barbs at each other in this House. Often, the House is at its very best when we are allowed to develop our arguments and when we listen in a spirit of respect for one another, as we have this afternoon, not just in this debate but in the previous debate. Even though I only agreed to step in for my hon. Friend the Member for Rhondda (Sir Chris Bryant) on Monday, my office has been absolutely inundated by those on both sides of the argument. There are those who believe that the merger will allow for more effective competition, while others, such as Unite—which my hon. Friend the Member for Stockport mentioned, and which has put a huge effort into the campaign—believe that it will raise prices to the detriment of consumers and result in job cuts across the board. It is my understanding that the Competition and Markets Authority is investigating, and the call for views on the merger ended on 1 November.

I have listened to the debate closely, and it seems to me that the potential merger rests on two central questions. First, will consumers and the industry benefit from it? Secondly, who has access to the UK’s mobile networks? Let me turn to the first question. The merger will shrink the market, resulting in only three major competitors instead of the present four. The new company would be the largest in the market, boasting over 27 million customers. This comes against the backdrop of tariff increases this year. O2 has increased prices by 17.3%, while EE, Vodafone, Three and BT Mobile have increased prices by 14.4%. It is not just on contracts that customers are losing out; people who use their phones infrequently are getting less value for their money. Ofcom has also stated that the year-on-year real-terms increase in pay-monthly, SIM-only contracts is 13%.

A smartphone is no longer a luxury, but an essential piece of everyday life. It is not something that we as a society can allow people to be priced out of having. Children are taught on smartphones. Interviews take place over the phone. Emergency services are called on smartphones. If Three and Vodafone merge and continue their respective trends of increasing prices over inflation, that could price many out of the necessity of having a phone.

From an industry perspective, Unite the union estimates the merger will cause 1,000 to 1,600 job cuts. Vodafone is also in the process of cutting 11,000 jobs globally and has acknowledged that the proposed merger would see duplication with head office jobs. Both companies claim that there is more competition in the market than it first appears. Although there are only four mobile network providers, there are numerous mobile virtual network operators, such as Giffgaff, that can buy access to the infrastructure of the big four at incredibly competitive rates to offer competitive pricing. The mobile virtual network operators believe that a third big player in the market would be better for competition.

Furthermore, Three and Vodafone claim that the merger is necessary to invest in 5G, aiming for an £11 billion investment over a decade. While the investment target seems positive, it remains largely uncertain. Past mergers in other markets have not always resulted in increased investment. Notably, the European Union’s competition directorate blocked CK Hutchison’s attempt to acquire O2 from Telefónica in 2016. Competition involves more than just three players vying for business. The policy of local coverage often limits consumer choices. With fewer players in the market, pricing decisions might prioritise company profits over consumer value.

[Kirsty Blackman]

The hon. Gentleman mentioned the necessity of mobile phones for life. When interacting with Government services, for example going through the Jobcentre system, people have to be able to access the internet, although many of them are earning very little or nothing. Does he share my concern that the reduction in the number of companies in the market will hit hardest those people who are least able to afford it?

[Chris Evans]

I absolutely agree. At the start of my speech, I alluded to what my hon. Friend the Member for Stockport said about 1.2 million people in Greater Manchester being digitally excluded. We do not know the figures nationwide, but that is a serious worry to me and something we have to bear in mind when we talk about such mergers. I will develop that argument further when I sum up. With fewer major players in the market, pricing decisions might prioritise company profits over consumer value. I hope the issues raised will be thoroughly examined by the CMA in its investigation.

Let me turn to the second key question, about access to the UK mobile networks. It is important that the Government safeguard national and personal data if the merger moves forward. Recently, Vodafone secured a contract to provide video conferencing and recording services at UK military courts. If the merger proceeds, Three would then hold them as well. That becomes significant when we learn that CK Hutchison Holdings, the owner of Three, is a conglomerate based in Hong Kong and registered in the Cayman Islands, established in 2015, as mentioned by my right hon. Friend the Member for Birmingham, Hodge Hill.

At this early stage, it is only right to ask, in light of national security concerns that have been raised in this House and elsewhere, whether any assessment has been made of CK Hutchinson’s connections with the Chinese state. If so, does the merger pose any risk to individual security or that of the nation? Would the merger involve excluding Government contracts from the merger to ensure data security? These are crucial points that demand careful consideration and a robust plan to protect sensitive data and national interests. Is the economic security sub-committee of the National Security Council looking at the merger? As this decision is a matter of national security, will Parliament have an active role in this decision-making process?

Before the Minister responds, I draw his attention to a report of the Intelligence and Security Committee. The Chair of the Committee, the right hon. Member for New Forest East, will correct me if I am wrong, but it says:

“Effective Parliamentary oversight is not some kind of ‘optional extra’ – it is a vital safeguard in any functioning Parliamentary democracy”.

Therefore, I hope the Minister will assure us that Parliament will be engaged and informed throughout the significant decision-making process. That is a hugely important point—I cannot emphasise that enough—given the potential national security risk if the largest mobile network in the UK is significantly controlled by a foreign company.

Ultimately, the decision on security issues rests with the Investment Security Unit in the Cabinet Office, with final approval resting with the Prime Minister. I hope the Prime Minister will consider the sensitive material involved in the merger including, but not limited to, the data from 27 million customers, along with contracts for the NHS, the Ministry of Justice and the Ministry of Defence. Whether the merger goes ahead remains to be seen, but many questions have yet to be addressed. In winding up, will the Minister shed some light on the vital issues raised today in this vital debate?