Vodafone and Three prepare to announce merger

Vodafone and Three prepare to announce merger Ryan is a senior editor at TechForge Media with over a decade of experience covering the latest technology and interviewing leading industry figures. He can often be sighted at tech conferences with a strong coffee in one hand and a laptop in the other. If it's geeky, he’s probably into it. Find him on Twitter (@Gadget_Ry) or Mastodon (@gadgetry@techhub.social)


Vodafone and Three are close to agreeing on a merger of their UK telecoms businesses, creating the biggest mobile operator in the country.

The deal is expected to be worth £15 billion ($19 billion) and will knock BT-owned EE from the top spot in terms of mobile subscribers.

The merged company’s equity is valued at around £9 billion, with £6 billion in debt. The merger is expected to be agreed this month, with a formal announcement due to be made “very soon”. 

However, the deal will face plenty of regulatory scrutiny.

Dan Ridsdale, Director of TMT, Edison Group, comments: “The regulatory approval process is likely to take some time and approval will be required at two levels – from the CMA – who will look at the competitive/economic benefits and from the government under the National Security and Investment Act.

“For the CMA, the equation is likely to come down to how much they take into account the consumer benefits from the promised acceleration to the rollout of 5G, gained through economies of scale versus the competitive risks from concentrating market power.”

Three UK is owned by Hong Kong-based conglomerate CK Hutchison.

In March, CK Hutchison’s senior leadership met with British government officials to seek political support for the merger. If given the green light, the merger could allow CK Hutchison to withdraw from the UK telecoms market.

Three, the UK’s smallest mobile operator by subscribers, previously attempted a merger with O2, the country’s second smallest. The duo pitched the merger as necessary to compete against EE after it was acquired by BT.

However, the merger between Three and O2 was blocked by European competition regulators when the UK remained under the EU’s jurisdiction.

“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,” adds Ridsdale.

“This will be offset by concerns that recent price hikes implemented by the mobile operators will become easier to implement in a less competitive environment, although the operators are likely to argue that a more efficient market structure will reduce cost/investment pressure.”

After the EU blocked the Three-O2 merger, O2 was later acquired by Liberty Global-owned broadband giant Virgin Media. Three was left to try and find an interested partner to compete with its larger rivals, which it may now have done with Vodafone.

“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.

(Photo by Chris Liverani on Unsplash)

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Author

  • Ryan Daws

    Ryan is a senior editor at TechForge Media with over a decade of experience covering the latest technology and interviewing leading industry figures. He can often be sighted at tech conferences with a strong coffee in one hand and a laptop in the other. If it's geeky, he’s probably into it. Find him on Twitter (@Gadget_Ry) or Mastodon (@gadgetry@techhub.social)

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