Following recent speculation, Vodafone confirmed today that it’s in discussions with Three-owner CK Hutchison Holdings Limited to combine the companies.
The proposed transaction would result in Vodafone owning 51 percent of the combined business while CK Hutchison would own the remaining 49 percent.
Ernest Doku, telecoms expert at Uswitch, comments: “Two of the UK mobile market’s biggest players teaming up would be a huge shake-up to the industry, turning the big four into a big three.
“Joining forces should allow Vodafone and Three, currently the third and fourth-biggest mobile providers, to share infrastructure and expand their 5G coverage quicker, helping them compete with EE and O2.”
The UK’s largest mobile operator by subscribers, EE, was acquired by telecoms giant BT in 2016 in a deal worth £12.5 billion. Critics believe the deal further consolidated EE’s position while proponents say it drove additional investment and brought innovative “quad-play” packages to consumers of mobile, broadband, TV, and landline services.
Last year, Virgin Media acquired O2 for £31 billion. In October 2021, the combined entity launched its own converged bundles Virgin Media’s speedy broadband network with O2’s mobile connectivity under the ‘Volt’ branding.
Kester Mann, Director of Consumer and Connectivity at CCS Insight, said: “In telecommunications, the most successful companies tend to be the largest; bulking up would offer many synergies and cost-saving opportunities.
“Under the status quo, it’s hard to see either operator growing enough organically to get close to challenging BT and Virgin Media O2 for size in the UK.”
Regulators are likely to heavily scrutinise the deal, especially as it would consolidate the UK’s mobile operator market from four to just three.
“It would be up to the competition authorities to decide whether reducing the number of players is for the overall good of the market. Advocates will argue it encourages investment; dissenters will claim it’s a reason to push up prices,” adds Mann.
“Of course, Vodafone pairing with Three is just one potential tie-up in the UK. Other deals involving Virgin Media O2, TalkTalk, and Sky have been speculated in recent months.”
(Image Credit: Vodafone)
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