Chest beating gorillas didn’t naturally spring to mind over Microsoft’s proposed acquisition of Activision Blizzard for $69bn, although the deal has had a mixed reception from various jurisdictions, approved by the EU (possibly surprisingly), but being opposed by the UK and, for the moment at least, by the FTC in the USA.
Some commentators have drawn comparisons between Microsoft-Activision Blizzard and the proposed combination of Vodafone UK and Three UK, which is essentially a misunderstanding of the markets and potentially a slur on Vig Tech ‘gorillas’. The fact that the EU approved Microsoft’s intended acquisition shows that proposed compliance commitments to address competition concerns were deemed acceptable – even if other regulators are less sanguine.
However, the same commentators – often with limited tech or business experience – think the proposed Vodafone-Three deal is similarly anti-competitive. This is dogmatic, ill-informed, and misses the point.
GlobalData’s Rob Pritchard highlights that the opposite is true: ‘If the Vodafone-Three deal is blocked, you will see a market that will constitute two strong UK mobile players, BT/EE and Virgin Media O2, and two relatively weak players: Vodafone and Three. Without the resources to invest substantially, the latter will continue to lose share and the market will move in the direction of a duopoly. The combination of the third and fourth service providers will actually enhance competition, and investment in networks and services over time.’
It is also important to put these often conflated deals in context. Although back in the last century the likes of BT and Vodafone were seen as big beasts bestriding the global telecoms market, striking fear into the hearts of competitors, they pose far less of a threat these days.
The facts speak for themselves: Vodafone Group’s revenues in its 2023 financial year were €45.7bn, with the UK accounting for €6.824bn. Three UK generated revenues of £2.52bn in its last financial year. It is worth noting that Microsoft had over $100bn in cash on hand at the end of last year. Its market capitalization is $2.5tn. Vodafone’s is just under £20bn ($25bn). It is clear that the gorilla is somewhat more threatening than the erstwhile telecoms colossus.
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A thoughtfully regulated and monitored combination of Vodafone and Three should actually improve competition, choice, and innovation in the UK market. Comparisons with Microsoft and other market gorillas are misplaced.