06:56 AM EDT, 03/22/2024 (MT Newswires) -- Vodafone's ( VOD ) proposed merger with Three UK could lead to higher prices and reduced quality, Britain's Competition and Markets Authority said Friday.

The CMA said it found that Vodafone ( VOD ) and Three provide important alternatives for mobile customers and that combining two of Britain's major mobile network operators would stifle competition.

The deal may also "make it difficult for smaller mobile 'virtual' network operators such as Sky Mobile, Lebara and Lyca Mobile to negotiate good deals for their own customers, by reducing the number of mobile network operators capable of hosting these 'virtual networks'," the competition watchdog said.

"Vodafone UK and Three UK are sub-scale, unable to cover their cost of capital, and constrained in their ability to invest and compete effectively against the two market leaders," Vodafone ( VOD ) and Three responded to the CMA in a joint statement, noting that the UK is lagging behind other European countries in quality of mobile network services.

"The merger will create a third mobile network operator with scale, able and incentivized to invest fully in a best-in-class network," the companies said.

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