Vodafone Group and CK Hutchison confirmed a long-mooted merger of their UK telecoms businesses following more than eight months of talks, in a proposed deal the pair claimed levels-up the playing field and ups competition with BT Group and VMO2.
In an announcement, the companies stated they had entered into binding agreements to merge Vodafone UK and 3 UK, with the former holding a 51 per cent stake and CK Hutchison 49 per cent.
No cash will be paid upon completion and the businesses will contribute different debt amounts to achieve the ownership split.
Frameworks have been put in place for Vodafone to acquire CK Hutchison’s 49 per cent stake in the future.
Current Vodafone UK CEO Ahmed Essam will become CEO of the joint business, and 3 UK CEO Darren Purkis will take on the CFO role.
The deal will now be the subject of regulatory scrutiny, but the companies expect it to close before the end of 2024.
Consumers, country, competition
Talks were announced in October 2022 following widespread speculation of a merger, which the pair pitched as necessary to accelerate 5G deployments, improve rural broadband access and boost the overall market for consumers.
Vodafone Group CEO Margherita Della Valle said the tie-up is “great for consumers, great for the country and great for competition”.
The combined company has pledged to invest £11 billion in the UK over ten years to create “one of Europe’s most advanced standalone 5G networks, deliver up to £5 billion per year in economic benefits by 2030, and create jobs and support digital transformation” of businesses in the nation.
On competition, the merged Vodafone-3 entity will create a “third operator with scale”, increasing competition with leading converged operators and providing more choice for wholesale partnerships for the country’s MVNOs.
Will it be approved?
Paolo Pescatore, founder of PP Foresight, expects the deal to be a “tough sell” with regulators, pointing to a failed 3 UK, O2 deal in 2016 and the fact both companies have been outperforming the market for the last year or so.
“Let’s see if the authorities have a change of heart. Both parties need to demonstrate that this is genuinely in the interest of UK plc, the economy and consumers for it to have a chance of getting over the line.”
Kester Mann, director, consumer and connectivity at CCS Insight, added the prospect of higher prices will be a major concern for the Competition and Markets Authority, but still believes the deal should be approved.
“It is better to have three strong providers than two that are dominant and two that are sub-scale. Blocking it could thwart the long-term development of the UK’s telecoms infrastructure.”
