Unite the union claims Vodafone and Three merger is about 'corporate greed'

Flags up potential job cuts, price hikes, and national security issues

Union Unite thinks the proposed merger in Britain of telcos Vodafone and Three would results in thousands of people losing their jobs, price hikes for customers, and a "serious threat" to national security.

The warning came this morning and comes after politicians debated the alliance that was first mooted in June, when the duo pledged to sink £11 billion ($13.93 billion) into the local 5G infrastructure over a decade.

Liam Byrne, Member of Parliament for Birmingham Hodge Hill, a chair of the cross-party Business and Trade Select Committee, led a debate about the merger in the House of Commons on October.

The evidence sessions explored possible implications for competition, as well as arguments for and against the tie-ip. Vodafone, Three, a chief economist, and Unite all presented to the politicos.

Unite is pretty emphatic in its desire for the merger to be cancelled, referring to it as a "blighted deal."

"The involvement of Three's parent company, CK Hutchison, which has direct links to the Chinese state, raises significant national security concerns. If the merger goes ahead, CK Hutchison would have access to over 27 million UK customers' accounts, as well as vital UK public contracts," Unite claimed.

"The merger also threatens the UK's mobile network operator market, reducing it from four to three players. This reduction is likely to lead to increased prices for consumers. Independent analysis indicates the merger could see bill increases of up to £300, impacting millions of UK residents, as well as putting thousands of jobs at risk.”

Sarah Carpenter, Unite's executive head of operations, said its objections were about "taking a stand for workers and consumers, against corporate greed and wheeling dealing."

In October, the Competition and Markets Authority asked industry for feedback about the alliance between Vodafone and Three to determine the anticipated impact of rivals, customers, or both.

Under the terms of the merger agreement, Vodafone would own a 51 percent stake in the consolidated entity, which will be referred to as "MergeCo" until the transaction is approved and a new brand can take shape.

When the deal was first announced, Canning Tok, co-managing director at Three parent CK Hutchison, said: "Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital." The plan is to pour billions of pounds into next generation networks.

In the House of Commons debate, Dr Jorge Padilla, senior managing director, head of Compass Lexecon Europe, said there is a stong case for network consolidation.

"Let us look at the US. It has seven or eight times the population of the UK. Its income per capita is greater than the UK, it has an active business sector, it has faster growth, yet it has three networks. The costs of investment in 5G are significant and there is considerable uncertainty. When you combine those two factors, you realise that the number of networks that can be sustained in an economy is limited.

Karen Egan, head of mobile at Enders Analysis, told the Business and Trade Committee: "The number of networks is always a balance of consumer choice and duplication of costs.

"When I look at what has happened in the market over the past few years, the need for ensuring consumer choice among the mobile network operators has diminished, primarily because of the success of the MVNOs, their ability to move, and consumer protection initiatives from Ofcom, while the costs have greatly increased with 5G, with increased security and with the removal of Huawei.

"At the same time, industry returns have gone down. Since the last proposed merger, revenues in the sector have gone down by 20 percent in nominal terms and more than 30 percent in real terms...traffic volumes have gone up tenfold. Running a network in the UK has become a whole lot more expensive, and the revenues available to cover those costs have gone down."

Yet George Stevenson, bargaining and investigative researcher at Unite the Union, brushed off these suggestions.

"Here we are looking at a couple of companies looking for a shortcut to increase their profit levels. We have seen them do this in other sectors. In Australia... they jacked up prices immediately within a year of the merger taking place, but their profit margins doubled since the merger and their dividend payments went up by 2,700 percent.

"In this situation, the UK is perfectly capable of supporting four or many other mobile network operators, but if this merger takes place we will see price rises. We will see profits go up. Our research shows that this will increase pricing power for these companies, and that is their primary concern," he added.

As Kester Mann, CCS Insight director of consumer and connectivity, pointed out to us previously, the industry should expect "passionate lobbying and intensive debate ahead of the crucial decision."

He told us in October that if concessions and remedies cannot be agreed, "Vodafone and Three would be left with highly uncertain futures in the competitive UK market."

The Register has asked Vodafone and Three to comment.

We asked Unite how many members it has working at Vodafone and Three, and whether it plans to ballot them on their desire for potential industrial action. ®

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