V -3 MERGER CASE STUDY
Following the completion of their £16 billion merger, Vodafone and Three formed the UK’s
largest network operator, VodafoneThree. This deal moved the UK mobile market from an
oligopoly with four main players to just three (VodafoneThree, O2 and EE).
The UK Competition and Markets Authority (CMA) initially feared a substantial lessening of
competition, estimating that reduced rivalry could see average bills rise by 3% and that
smaller operators like Sky Mobile might face higher costs to access the UK mobile network.
To gain regulatory approval, Vodafone and Three agreed to behavioural remedies including a
legally binding pledge to invest £11 billion into UK mobile infrastructure by 2034. And they
also agreed a three-year cap on selected social and entry-level mobile tariffs.
What are 2 arguments that this merger might enhance consumer welfare in the
long run?
1. Dynamic efficiency gains from investment: Legally binding £11 billion
infrastructure pledge to fund nationwide next-generation infrastructure (like 5G
Standalone or eventually 6G). For UK, a world-class 5G network can be a catalyst for
improved labour productivity and a key part of harnessing the potential economic
benefits from AI.
2. Exploiting Technical Economies of Scale: By combining networks, Vodafone and
Three can eliminate duplicated infrastructure (such as overlapping mobile masts). EoS
– moving down LRAC curve towards the Minimum Efficient Scale – might lead to
lower real prices in long run.
What are some negative outcomes from a possible merger?
1. Market Power and Allocative Inefficiency: Remaining dominant firms
(VodafoneThree, EE, and O2) face less pressure to lower prices. Might also be some
tacit collusion. This leads to allocative inefficiency where P > MC. Causes a loss of
consumer surplus – which might be regressive and perhaps worsen the digital divide
in access to mobile services.
2. Risk of Regulatory Failure: Benefits of merger (£11bn investment) depend entirely
on the CMA’s ability to enforce “behavioural remedies.” Regulatory Capture and
information gaps may prevent the CMA from properly monitoring the newly-merged
firm.
, UNILEVER’S DE MERGER CASE STUDY
"In 2025, Unilever PLC – a business with a £50 bn annual turnover – completed a strategic
overhaul. Central to this was the demerger of its Ice Cream business on December 6, 2025,
which spun off global brands like Magnum and Ben & Jerry’s into a separate entity, the
Magnum Ice Cream Company. This move removed €8 billion of revenue characterised by
lower profit margins and a complex & costly refrigerated supply chain.
Unilever is focusing resources on 30 "Power Brands" (including Dove and Hellmann's),
which account for 78% of group revenue. Unilever wants to pivot towards higher-growth,
premium niches. Brand loyalty with these products provides Unilever with significant price-
making power.
Despite the demerger, in 2025, Unilever spent £230 million on the acquisition of Wild, a UK-
based refillable deodorant brand."
What are some commercial aims behind a demerger such as Unilever?
Eliminating Diseconomies of Scale: As firms grow, they often reach a point where LRAC
rises. Decision-making becomes slow as layers of management increase. Different divisions
(Ice Cream vs. Soap) have incompatible supply chains and cultures – main aim is to move
back towards MES and release funds for strategic acquisitions such as Wild.
Unlocking Shareholder Value: If Division A is worth £10bn and Division B is worth £5bn,
but the combined company is only traded at £12bn, the firm is "missing" £3bn in value.
Removing layers of management should address principal-agent problems & increase
profitability – thereby driving the share price higher & increasing dividends.
Following the completion of their £16 billion merger, Vodafone and Three formed the UK’s
largest network operator, VodafoneThree. This deal moved the UK mobile market from an
oligopoly with four main players to just three (VodafoneThree, O2 and EE).
The UK Competition and Markets Authority (CMA) initially feared a substantial lessening of
competition, estimating that reduced rivalry could see average bills rise by 3% and that
smaller operators like Sky Mobile might face higher costs to access the UK mobile network.
To gain regulatory approval, Vodafone and Three agreed to behavioural remedies including a
legally binding pledge to invest £11 billion into UK mobile infrastructure by 2034. And they
also agreed a three-year cap on selected social and entry-level mobile tariffs.
What are 2 arguments that this merger might enhance consumer welfare in the
long run?
1. Dynamic efficiency gains from investment: Legally binding £11 billion
infrastructure pledge to fund nationwide next-generation infrastructure (like 5G
Standalone or eventually 6G). For UK, a world-class 5G network can be a catalyst for
improved labour productivity and a key part of harnessing the potential economic
benefits from AI.
2. Exploiting Technical Economies of Scale: By combining networks, Vodafone and
Three can eliminate duplicated infrastructure (such as overlapping mobile masts). EoS
– moving down LRAC curve towards the Minimum Efficient Scale – might lead to
lower real prices in long run.
What are some negative outcomes from a possible merger?
1. Market Power and Allocative Inefficiency: Remaining dominant firms
(VodafoneThree, EE, and O2) face less pressure to lower prices. Might also be some
tacit collusion. This leads to allocative inefficiency where P > MC. Causes a loss of
consumer surplus – which might be regressive and perhaps worsen the digital divide
in access to mobile services.
2. Risk of Regulatory Failure: Benefits of merger (£11bn investment) depend entirely
on the CMA’s ability to enforce “behavioural remedies.” Regulatory Capture and
information gaps may prevent the CMA from properly monitoring the newly-merged
firm.
, UNILEVER’S DE MERGER CASE STUDY
"In 2025, Unilever PLC – a business with a £50 bn annual turnover – completed a strategic
overhaul. Central to this was the demerger of its Ice Cream business on December 6, 2025,
which spun off global brands like Magnum and Ben & Jerry’s into a separate entity, the
Magnum Ice Cream Company. This move removed €8 billion of revenue characterised by
lower profit margins and a complex & costly refrigerated supply chain.
Unilever is focusing resources on 30 "Power Brands" (including Dove and Hellmann's),
which account for 78% of group revenue. Unilever wants to pivot towards higher-growth,
premium niches. Brand loyalty with these products provides Unilever with significant price-
making power.
Despite the demerger, in 2025, Unilever spent £230 million on the acquisition of Wild, a UK-
based refillable deodorant brand."
What are some commercial aims behind a demerger such as Unilever?
Eliminating Diseconomies of Scale: As firms grow, they often reach a point where LRAC
rises. Decision-making becomes slow as layers of management increase. Different divisions
(Ice Cream vs. Soap) have incompatible supply chains and cultures – main aim is to move
back towards MES and release funds for strategic acquisitions such as Wild.
Unlocking Shareholder Value: If Division A is worth £10bn and Division B is worth £5bn,
but the combined company is only traded at £12bn, the firm is "missing" £3bn in value.
Removing layers of management should address principal-agent problems & increase
profitability – thereby driving the share price higher & increasing dividends.
