Vodafone and Three owner CK Hutchison have agreed to merge their UK operations in a deal that will create Britain’s biggest operator worth a reported £15bn.
Vodafone and CK Hutchison made the official announcement on Wednesday, unveiling the details of the merger, which aims to enhance competition and stimulate investment with a commitment of $14 billion in the UK.
The merged company will be majority owned by Vodafone, with 51% of the combined business and CK Hutchison owning the remaining 49%. The new entity will be led by Ahmed Essam, the current Vodafone UK boss. Darren Purkis, the finance chief of Three UK, will assume the same role in the merged company.
Additionally, Vodafone has been granted options that allow it to acquire Hutchison’s 49 percent stake in the future.
Canning Fok, co-managing director of CK Hutchison, emphasised the scale required to deliver a top-notch 5G network in the UK.
Fok stated:
“Three UK and Vodafone UK individually lacked the necessary scale to achieve their cost of capital. By combining forces, the merged entity will possess the resources and capabilities needed to provide exceptional 5G services, transforming the mobile landscape in the UK.”
Following the announcement, Vodafone’s shares experienced a notable boost of 3.6 percent, recovering from a recent dip to a 25-year low of 71 pence. The market responded positively to the merger, indicating confidence in the potential benefits and opportunities it presents for the two companies and the UK mobile industry as a whole.
Aiming to complete the deal by 2024, Margherita Della Valle, chief executive of Vodafone, said it was a “gamechanger” that would be “great for customers, great for the country and great for competition”.
“As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear £11bn network investment plan – driving growth, employment and innovation.”
Comments from Vodafone and Three suggest big things are in store for both new and existing customers of the two networks.
Upon the completion of the merger, the companies will essentially share their cellular networks to vastly improve overall coverage and reliability.
It should also allow the two companies to combine and essentially double their network capacity, which should make the networks more reliable in particularly congested places like concerts and football games where signal is usually pretty spotty. This allows the merged brands to better compete with competitors.
Importantly, the companies have confirmed that these upgrades will come completely free of charge, with no contract price hikes planned. There are also said to be “certain flexible, contract-free offers” and social tariffs for those not ready or able to commit to a long-term phone contract.
Ahmed Essam, Vodafone UK chief executive, said:
“The combination of Vodafone UK and Three UK will bring more choice and better value to customers nationwide.
“With scale to invest, we will create a best-in-class 5G network, supporting the government’s 5G ambitions, drive digital transformation and create jobs.”
As the merger progresses, the attention will shift to regulatory reviews, which will determine the feasibility and implications of the deal.
In 2021, the Competition and Markets Authority approved the proposed merger between Virgin Media and O2. But a previous attempt by Three to buy O2 in 2016 was blocked by the European Commission over concerns that it would reduce competition for UK consumers.
The watchdogs expressed concerns that consolidation in the market could result in less competition and choice for consumers, potentially pushing up bills.
Robert Finnegan, Three UK, chief executive, commented:
“Today’s news marks a significant step in our efforts to create a business that will build the biggest and fastest 5G mobile network in the country.”
