When two massive businesses merge and become one even bigger corporation, what do you think will happen?

  1. The cost savings made by merging will result in cheaper bills and better service.
  2. The lack of competition and market dominance will result in everyone’s bills going up.

Call me an old cynic, but in my experience, big mergers usually result in option 2. And the weight of evidence is on my side.

So when it was announced this week that Vodafone and Three UK are going to merge in to one mega-communications firm, my first thought was ‘this is bad news for mobile phone customers’.

Of course, the deal still has to get past the UK Competition Regulator, the Competition and Markets Authority (CMA) who have been showing their mettle recently by blocking some of these mergers that aren’t in the public interest. However, last year, Virgin Media was allowed to merge with O2, creating another huge communications business. If the current proposals go through, that’ll reduce the top 10 mobile phone service providers to 8 – and that’s bad news for us all. Because 24 million people will be stuck on contracts with just two businesses.

What’s the problem with mergers?

When businesses buy competitors or form a merger, we are usually assured that the new business will commit to infrastructure, customer service and technological improvements. Promises are made involving no price rises and better deals, along with the protection that a more powerful organisation can bring.

Yet, time and time again, staff layoffs are announced within months of mergers and takeovers going through. The complexity of bringing two different styles of management and combining computer systems can cause chaos when it comes to solving problems and offering good customer service. And those shareholders want returns fast, so the promised investment often becomes diluted and meaningless.

Mergers create monopolies. This is bad for us customers, because we have less choice if we’re unhappy with existing service providers. The less competition there is, the more businesses can charge for the same services. A prime example of this is the banking industry in the UK. Time and time again, readers tell me that there’s no point switching bank accounts as the main high street banks are all the same. There’s a lot to be said for that perception. Just look at the complaint volumes in the official data here, or in the much easier to read Which? customer satisfaction survey here.

In short, there’s little between the main high street banks. Years of mergers, takeovers, painful divorces and competition have resulted in businesses that are almost identical in the (rubbish) interest levels they offer, matching debt interest on overdrafts and loans and almost identical mortgage deals.

In fact it’s the new online challenger banks who consistently perform the best in terms of customer service and satisfaction. It’s not mergers that make good firms, it’s new and innovative businesses willing to rethink how things work that make the difference.

Market domination can also dramatically affect our lives. Online advertising is almost completely dominated by Google and Facebook, meaning these two businesses – notoriously atrocious at customer service (you can’t even speak to Facebook) – effectively control the products that are marketed to us, allow scammers to work their weak systems and fail to police their own sites. Despite many threats to break these businesses up, they still dominate our lives.

What if I’m not happy with the merger?

One of the best ways you can express your displeasure with changes made to a business is to vote with your feet.

Mobile phone and broadband companies are notorious for charging ridiculous exit fees if you have the audacity to try to leave your contract early. But you can bail on a bad business if you feel your contract has changed significantly or there has been a notable drop in the quality of service.

You’ll have to gather a bit of evidence though. When 02 and Virgin Media merged, I was horrified. One of these businesses I love, the other I hate with a passion (I won’t say which is which…) Because of my bad experiences with one business, I spoke to the other about ending my contract early. To my surprise, I was told I could leave my contract early without charge. But I was offered a few extra benefits and bolt-ons if I was willing to give it another six months to see how things worked out. I must confess, I was impressed by this level of service, so I stuck around (for now).

If the new merged business insists you can’t leave without paying an exit fee, then keep a keen eye out for any service dips. Keep a log of any problems with signal and wi-fi (you can find a range of free service checker apps online and most mobile phone service providers have their own trackers on their apps). Report these incidents, then make a complaint and a formal request to leave your contract without penalty.

If they don’t play ball, there are two free Communications Ombudsman Services you can go to. The business is obliged by law to tell you which one they are signed up with. And yes, it’s ludicrous that we have two Ombudsmen services in competition with one another. I’d like to see just one. Tell your MP.

How do I save cash if prices go up?

Time to get crafty! One of the biggest earners for mobile phone companies is when they encourage you to upgrade your handsets on a regular basis, billing you alongside your regular phone bill. This is a crafty manoeuvre in two ways. For one, most people think you can’t go to a competitor while paying off your handset.

Secondly, despite repeated warnings and fines, some businesses in the past persisted in debiting their customers for handsets that have been paid off. If this happens to you, not only are you entitled to that money back, I’d ask for interest and compensation too.

According to Ofcom, you’re only likely to be charged exit fees with a ‘bundled’ contract (one with the phone and call/internet charges combined). If it’s a linked contract (two separate contracts that are connected for a period then become separate) or an unlinked contract, then you may be able to go to a competitor without charge while paying off your handset.

But is paying for your phone upgrade through a mobile phone provider a good idea? I’d argue that there are much better deals out there. Some businesses will allow you to pay in instalments for free (don’t just buy now, pay later credit if it charges interest). Alternatively, some credit cards have interest free periods. So if you are able to afford £84 a month for 12 months on an interest free card, then you can buy a £1,000 handset with no additional charges. Let’s be honest though, credit cards take discipline so be honest with yourself about whether you can stick to this plan. You can compare cards here.

As for bills, there are a range of ‘pay as you go’ mobile phone service providers – many of whom have much better reputations for customer service. You buy data and usage packs when you need them and there’s no need for a contract.

It should be really easy to switch if you are out of contract. In fact, you can do it by text. Here’s regulator Ofcom’s guide. If you are going to ditch one phone service provider for another, then do check online first to see what their coverage is. Just type in the name of the firm and ‘coverage checker’ to see if you’ll be covered where you live and work.

What might happen with the Vodafone and Three UK merger

Regular readers will know I love to get the crystal ball out – but this one is really hard to call.

On one hand, the CMA have registered their disapproval about loads of proposed mergers recently, blocking a number of the many that have been recently proposed. Most notably, the CMA made Facebook sell its recently purchased gif business Giphy.

It’s hard to argue that the merger between Vodafone and Three UK will benefit us all, given the previous records of similar mergers. However, after O2 and Virgin Media were allowed to join forces, it would be hard to argue that a similar arrangement can’t go through. So with a heavy heart, I suspect we have lost this battle.

…but don’t forget… vote with your feet if the new business doesn’t deliver.

Featured in Times Money Mentor – Martyn James


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