Vodafone-Three merger could lead to higher prices

The proposed merger between Vodafone and Three could lead to "higher prices" and "reduced quality" for customers, the UK's competition watchdog says.

The proposed £15bn deal could now be subject to an in-depth investigation.

The combined group would be the UK's biggest mobile network with about 27 million customers.

The firms said the deal would result in an additional investment of £11bn in the UK.

But the Competition and Markets Authority's (CMA) deputy chief economic adviser Julie Bon said she had "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."

The regulator is also concerned that the deal may make it more difficult for smaller players such as Sky Mobile and Lyca Mobile - who rent space from the bigger operators - to get a good deal.

But Vodafone's UK chief executive, Ahmed Essam, defended the deal, saying it would allow the companies to create an operator with the scale required to take on market leaders BT/EE and Virgin Media-O2.