Proposed Merger of Three UK and Vodafone

Lord Spellar Excerpts

Tuesday 19th September 2023 Westminster Hall

[Navendu Mishra (Stockport) (Lab)]

I beg to move,

That this House has considered the proposed merger of Three UK and Vodafone.

It is a pleasure to serve under your chairship, Sir George, and I am grateful for having been granted the debate. I refer the House to my entry to the Register of Members’ Interests. I also welcome my hon. Friend the Member for Rhondda (Sir Chris Bryant) to his new role as shadow Minister.

In July, it was announced that Vodafone and Three UK had agreed to combine their businesses, in an effort, they claim, to create one of Europe’s leading 5G networks. Although I welcome the aspiration, such a deal will have terrible consequences, with higher prices for consumers, job losses alongside inflated corporate profits, and a threat to the UK’s national security. The newly combined company would have 27 million customers, which would make it the largest mobile network operator in the UK, surpassing O2 and EE. That makes today’s debate important, as both carriers already have customers in every one of the 650 seats represented here in the House of Commons.

The announcement of the merger came only months after Vodafone had already announced 11,000 job cuts worldwide, including here in the UK. When Vodafone UK’s chief executive was subsequently asked what impact the merger would have on future job losses, he stubbornly said,

“it’s very early…to talk about job losses”

and that “some roles” might be impacted. External studies suggest that “some” could be as many as 1,600 roles. When Vodafone and Three merged with TPG in Australia in 2020, they claimed that it would accelerate the benefits of substantial network investments made by both companies, when in reality investment levels across the sector are down by 45%.

[John Spellar (Warley) (Lab)]

Is this not part of what we are seeing across the IT sector, which is what we previously saw in other industrial sectors, for example, in companies such as John Rockefeller’s Standard Oil Company? Basically, these companies drive out competition and then set their own terms and the terms of those who work in the industry. Is this not of real concern not just to consumers, but to all those concerned with the creation of those monopolies?

[Navendu Mishra]

I entirely agree with my right hon. Friend. This merger is bad news not just for UK customers, but for the people who work for both these businesses and, of course, it poses threats to national security as well.

Investment levels in the sector after the merger of Vodafone and Three in Australia went down by 45%. I ask the Minister: does the evidence therefore suggests that this will be a sensible merger here in the UK?

I want to place on the record my thanks to my union, Unite, for campaigning on this issue. It shares the concerns that so many of us have about jobs and national security, and it has consistently kept members aware of the implications since the merger was announced. According to Ofcom, 2.2 million households are struggling with the cost of mobile services. As a report by the House of Commons Library stated:

“Bills for some customers rose by over 11% in 2022. Communications consultancy Farrpoint has estimated that, based on inflation projections, bills will rise by a third over the next five years.”

Will the merger make bills cheaper for British customers? Research suggests not. The former chief competition economist at the European Commission has undertaken work showing that prices after a Three-Vodafone merger could be 50% higher. Based on average spending patterns, that means UK customers would pay up to £300 more per year on their mobile bills.

Only a few months ago, we heard that water companies were pushing for bills to rise by up to 40%. We know that electricity and gas payments almost doubled between May 2020 and June 2023, and the Bank of England chief economist recently warned that food inflation is unlikely to come down soon. Why will British customers who use Vodafone and Three have to find even more money for an unnecessary choice that has been foisted on them?

The merger is bad news not only for households’ financial security, but for the UK’s national security.

[Navendu Mishra]

The right hon. Gentleman makes important points, and national security is vital. I pay tribute to him for his work on this issue, and to all the members of the Inter-Parliamentary Alliance on China in the House of Commons and the House of Lords who are active in that campaign group.

[John Spellar]

When there was the issue about Huawei installing its equipment, one of the arguments made was that this was the hardware, and that the telephone companies and indeed the National Security Agency would be able to keep track of the software, but these companies are now deeply involved in the software. Does that not make these systems even more vulnerable to possible influence by the Chinese authorities?

[Navendu Mishra]

That is an important intervention. I accept the point that the hardware and the software are both quite open to interference, and I hope the Minister will be able to address these concerns from Members.

Following a merger, Three’s ultimate parent company, CK Group, will gain significant control over a business that will serve 40% of the UK’s population. Evidence suggests that there is extensive collaboration between the CK Group, the Li family that controls it and the Chinese state. It is well documented that the Li family has strongly backed pro-Beijing hardliner John Lee as the Chief Executive of Hong Kong, and supported a draconian new security law that would suppress dissent. On top of this, top CK Group executives sit on Chinese Government committees and have access to the inner circle of the Chinese elite. Does the Minister feel comfortable with a hostile foreign actor potentially having access to millions of UK citizens’ data?

Last month, I wrote to Greater Manchester police, my local force, sharing my concerns about the impact that such a merger would have, and Greater Manchester police is just one of the many police forces that have contracts with Vodafone at present. I am aware that Unite the union is happy to provide a list of police forces that have contracts with Vodafone, so I urge Members across the House to contact their local force to seek assurances about security and privacy measures. I implore the Minister to meet Unite to discuss these concerns as a matter of priority.

I have grave concerns that China’s domestic and counter-intelligence laws and Hong Kong’s national security law may pave the way for China’s security services to obtain confidential data from companies such as CK Hutchison. While in theory UK law prohibits the collection or transfer of individual user data, in practice there have been numerous examples in the UK and elsewhere where data has been accessed and transferred to China. Can the Minister give his assurances that he will do all in his power to prevent this from happening?

Although Ministers may assure us that they will do all in their power, I remain worried that that is not enough to stop sensitive UK Government communications being exposed. It goes beyond the police, as Vodafone has contracts with the Ministry of Justice and the national health service, too. The recent report by the Intelligence and Security Committee of Parliament found that the UK is of “significant interest” to China

“when it comes to espionage and interference”,

and notes that China uses

“all possible legitimate routes to acquire UK technology, Intellectual Property and data”,

but that such overt

“acquisition routes have been welcomed by HMG for economic reasons”.

Now would be a good time for the Government to acquit themselves of that allegation, and to put British consumers and our national security first.

In the past, the Prime Minister met the Intelligence and Security Committee yearly. I hope the Minister will give the House his assurance that the Prime Minister will reinstate those meetings. Now, faced with this significant merger and a litany of other national security threats, would be a good time to do so.

Unite the union has commissioned analysis from digital security expert Dr Alexi Drew, an academic and the director of tech security at consultancy Penumbra Analysis. Dr Drew found that the potential merger created substantial security risks, noting:

“Domestic laws and internal company policies will do little to hinder the exercise of nation-state intelligence gathering apparatus from leveraging any means of access to data that company mergers and acquisitions might enable. If a merger creates the technical or human means to collect valuable data, then the security services of any nation-state, Chinese or otherwise, are likely to make use of it.”

The Government have said that they will assess this risky merger through their investment security unit, so what stage has the ISU assessment reached, and will the acquisition be called in for a further national security assessment? Knowing what we know about the proposals, they seem wrong on so many levels. They are bad news for British customers, will result in significant job losses, and plainly pose a national security threat to the UK. Perhaps things would be very different if the Government actually had an industrial strategy for the UK and were not asleep at the wheel while our national infrastructure got sold off to hostile actors.

In the light of all this, I will be interested to hear the Minister’s contribution and whether he supports the merger. If he supports it, why? If he does not, what will he do to stop the merger?