Independent online – 15 December 2023
The Government must call in a planned merger of mobile phone companies Three and Vodaphone for closer inspection because of national security risks, the head of the Commons business and trade committee has said. Labour former minister Liam Byrne suggested the deal could leave communications at the heart of Government, the Cabinet Office, at risk of exploitation by the Chinese state.
Under the terms of the merger, Vodafone would own 51% of the new company, with CK Hutchinson, the Hong Kong-based owner of Three, taking the remaining 49% stake. The two companies have previously told MPs that the proposals could create thousands of new jobs in the UK, but trade unions warned it could lead to higher prices for consumers. The introduction of the national security law has destroyed Hong Kong's legal autonomy. It now provides Chinese authorities with the power to demand user data from companies under the threat of fines, asset seizures or indeed imprisonment.
In the Commons, Mr Byrne suggested the east Asian head office of the CK Group posed a national security risk for the UK. He said:
“We can’t avoid the fact that this proposed deal hands 49% of the merged Three-Vodafone business into the hands of the CK Group. CK Group is based in Hong Kong. As such it falls under the ambit of the Hong Kong national security law.
As the House knows, once upon a time, Hong Kong was considered meaningfully different from mainland China, but the introduction of the national security law has destroyed Hong Kong’s legal autonomy. It now provides Chinese authorities with the power to demand user data from companies under the threat of fines, asset seizures or indeed imprisonment.”
Mr Byrne added the deal could create a combined company
“that runs some of the most sensitive mobile and data contracts in the country”,
including NHS 111, police departments, the Ministry of Defence, the Ministry of Justice, and
“the monitoring system in the Cabinet Office. The merger radically extends CK Hutchinson’s access to UK telecoms’ user data from 9.5 million to over 27 million,”
he claimed. The senior Labour MP continued:
“I think the House needs some reassurance this afternoon that this is going to get called in under the terms of the National Security and Investment Act for the hardest possible scrutiny and if there is any hint of a risk, let’s be prudent and let’s block the deal.”
Sir Julian Lewis, the Conservative chairman of Parliament’s intelligence and security committee, warned his cross-party group of MPs and peers would be “blocked from scrutinising” the work of the Government’s new investment security unit, which was set up to look into deals like the Three-Vodafone merger. Sir Julian said:
“The Government has consistently said that all its work originally should have been overseen and scrutinised by the then-BEIS select committee and it is now in the Cabinet Office, but even then we are still not being allowed to scrutinise the unit.
There is something very strange if not sinister going on. We have demanded the right to look at the classified elements of this unit’s work.”
Culture minister Sir John Whittingdale said:
“We do have a longstanding and a robust system for looking at the competition aspects of mergers and acquisitions. That is something which is conducted independent of Government and for that reason it’s always been the case that Government ministers do not comment on the competition aspects, but rather that is for the regulatory body – which in this case is the Competition and Markets Authority – to make recommendations, and ministers will then reach a decision once that process has been completed.
In terms of national security implications, we also have an extremely robust system in place but it has always been the case that that is not something the Government talks about as to whether or not ongoing inquiries are taking place.”
“We do take telecoms security, like all other national security matters, extremely seriously.”
Sir John said it is on the record that the Government believes foreign ownership of major critical infrastructure does “raise security concerns” and that is why processes are in place.
In October, the Competition and Markets Authority began inviting interested parties to comment on the deal, in advance of launching a formal investigation.
Three and Vodafone were both contacted for comment.