Vodafone and Three-owner CK Hutchison are expected to announce the merger of their British operations “as soon as Friday or early next week”.
The report comes via Reuters which cited three sources familiar with the plans. According to the sources, the long-anticipated merger is now in its final stages.
According to insiders, the structure of the deal will adhere to Vodafone’s previous announcement in October. Under the arrangement, Vodafone would own 51 percent of the merged entity, while CK Hutchison would hold a 49 percent stake.
The ownership distribution would be achieved by adjusting the debt ownership rather than exchanging cash, providing a unique approach to the merger. Analysts estimate that, including debt, the overall value of the deal could be around £15 billion ($18.6 billion).
If the merger proceeds as planned, it would create the largest mobile operator in the UK, boasting approximately 27 million customers.
The combined entity would surpass both BT’s EE and Virgin Media O2. The consolidation of these two telecommunications giants would undoubtedly reshape the competitive landscape of the British market.
However, regulatory scrutiny is expected to be a major hurdle for the proposed merger.
Historically, regulators have expressed concerns about deals that reduce the number of major players in a market from four to three. As a result, the Vodafone and CK Hutchison merger is anticipated to face intense examination by regulatory authorities before receiving final approval.
“While the UK’s regulator has prevented the consolidation of the market from four to three players in the past, the investment required to deliver on 5G has changed the economics for operators and there is an argument to be made that the consumer will suffer unless the economics are improved,” said Dan Ridsdale, Director of TMT at Edison Group.
Industry experts will be closely monitoring the developments surrounding this potential merger, as it could have far-reaching implications for consumers, competitors, and the overall telecommunications sector in the UK.
“From a national security standpoint, the government will need to weigh up whether the risk is greater from having the nation’s largest mobile operator 49 percent owned by a Hong Kong-based company, than by having a smaller operator wholly owned by CK Hutchison, as it is now,” concludes Ridsdale.
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