The UK's Competition and Markets Authority (CMA) will thoroughly investigate the merger between Vodafone and CK Hutchison's Three unless the two mobile carriers address the regulator's concerns.

According to the agency's press statement released Friday, both companies have five business days to respond. The CMA started investigating the reported merger of two of the four UK mobile network operators in January.

In its statement on Friday, the principal competition regulator in the UK expressed worry that the acquisition will significantly reduce competition, bring higher costs for consumers, and create an unfavorable environment for mobile virtual network operators (MVNOs). 

These operators are an array of recently established network providers that use the underlying infrastructure of long-standing telcos. Last year, it was announced that Vodafone and Three would merge their UK companies.

The deal would give Vodafone a 51% controlling position and leave Three with a minority interest. Vodafone UK CEO Ahmed Essam and Three UK CFO Darren Purkis were to lead the new venture.

UK CMA Voices Reservations

According to CNBC, the CMA warned that mobile users in the UK might see price increases and declines in service quality due to the merger. 

The regulator also pointed out that Three is often the most affordable compared to the other three major UK mobile networks. Thus, the merger might "reduce rivalry between mobile operators to win new customers."

As an additional red flag, the CMA expressed concern that the purchase would hinder MVNOs like Sky Mobile, Lebara, and Lyca Mobile from negotiating favorable consumer terms. Notable MVNOs used both Vodafone and Three.

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Vodafone, Three Justifying the Planned Merger

According to Vodafone and Three, the decision by the CMA to submit the deal for a thorough investigation is a logical next move and follows the timeline they first laid forth.

In a joint statement, the two companies expressed their continued confidence in the transaction's ability to benefit competition, consumers, and the nation.

They said UK mobile network services lag significantly behind other European countries, and their networks were "sub-scale," unable to cover their cost of capital and to invest and compete against market leaders EE and Virgin Media O2.

"By creating a third player with the necessary scale to invest, the combination of our two companies will deliver one of Europe's most advanced networks and move the UK into the digital fast lane, benefiting customers from day one," Three UK CEO Robert Finnegan noted.

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