Plans by Vodafone and Three to merge could lead to higher prices for millions of mobile phone users, the competition watchdog has warned.
The proposed £15bn deal, announced last year, would bring 27 million customers together under a single provider.
But the Competition and Markets Authority (CMA) said it could lead to “higher prices and reduced quality” because it risks reducing rivalry between operators.
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It comes after the regulator carried out an initial review into the deal, which would create the UK’s largest mobile network.
The CMA has now given the companies five working days to respond to its concerns – otherwise an in-depth investigation will be launched which could end in the merger being blocked.
The regulator’s Julie Bon said: “Millions of people in the UK depend on effective competition in the mobile market in order to access the best deals for them.
“While Vodafone and Three have made a number of claims about how their deal is good for competition and investment, the CMA has not seen sufficient evidence to date to back these claims.”
She added: “Our initial assessment of this deal has identified concerns which could lead to higher prices for customers and lower investment in UK mobile networks.
“These warrant an in-depth investigation unless Vodafone and Three can come forward with solutions.”
Vodafone and Three said they would review the CMA’s concerns and “engage constructively”.
The companies have argued the deal will allow them to increase investment and better compete with their major rivals, BT/EE and Virgin Media-O2.
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The CMA said Vodafone and Three both provided “important alternatives for mobile customers” and noted they had made significant investments in recent years,…
