*

CMA also says deal could improve network quality, speed up

5G

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To make final decision on the deal in December

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Companies disagree deal raises competition concerns

(Adds details on possible remedies in paragraphs 8-11, shares

in analyst reaction in paragraph 12, shares in paragraph 13)

By Paul Sandle

LONDON, Sept 12 (Reuters) - Vodafone's ( VOD ) $19

billion merger with Three UK could push up bills for millions of

mobile customers and impact providers like Sky Mobile by

reducing the number of networks from four to three, Britain's

competition regulator said on Friday.

However, the Competition and Markets Authority (CMA) also

said the deal could improve network quality and speed up the

deployment of next generation 5G, adding it would examine

solutions to its concerns before making a final decision on the

matter in December.

The tie-up, announced 15 months ago between Vodafone ( VOD ) and

Three UK, owned by Hong Kong's CK Hutchison ( CKHUF ), has

challenged the regulator's previous stance that four networks

are required to keep prices low.

Both operators have argued the deal would create a stronger

third player that could compete more effectively with market

leaders BT's EE and Virgin Media O2.

"We will now consider how Vodafone ( VOD ) and Three might address

our concerns about the likely impact of the merger on retail and

wholesale customers while securing the  potential longer-term

benefits of the merger, including by guaranteeing future network

investments," CMA inquiry chair Stuart McIntosh said.

Vodafone ( VOD ) and Three said they disagreed with the CMA's view

that the deal raised competition concerns and could lead to

price rises for customers.

"This is not a final decision, and we look forward to

working with the CMA to secure approval," they said in a joint

statement.

The remedies suggested by the CMA included a commitment on

network investment, although it said this might not be

sufficient on its own to address all of its concerns.

Others included protection for customers, such as allowing

them to "roll over" their existing terms for a defined period.

In the wholesale market, it said pre-agreed terms could be

made available to third-party providers such as Lyca Mobile, Sky

Mobile and Lebara.

Those providers, which use the four major networks, could

also have a chunk of the merged company's capacity ring-fenced,

it added.

Barclays analysts said the suggested remedies looked

"broadly manageable".

Shares in Vodafone ( VOD ) were up 0.2% in early deals.