The merger of Vodafone and Three has been approved, creating the UK’s biggest mobile network with 27 million customers.

The £16.5bn deal can proceed if both companies agree to invest billions to boost the country’s 5G network and also cap certain mobile tariffs and data for at least three years to protect customers from “short-term” price rises.

The Competition and Markets Authority (CMA), which has allowed the merger, previously raised concerns it could drive up prices.

But Stuart McIntosh, chairman of the group leading the CMA probe, said the deal is “likely to boost competition in the UK mobile sector and should be allowed to proceed – but only if Vodafone and Three agree to implement our proposed measures”.

Since announcing their plans in June 2023, Vodafone and Three have insisted that joining forces would “move the UK into the digital fast lane”.

The firms claimed it would unlock £11bn in investment, while increasing competition in the Mobile Virtual Network Operators market – operators such as Sky Mobile, Lyca and Lebara, which rely on infrastructure of the big telecoms firms.

Currently, most of these use Virgin Media O2 and EE’s networks.

The rising cost of mobile phone contracts and other digital services has been an issue of concern for regulators, as has the slow pace of the UK’s 5G roll out.