Vodafone and Three to combine business in $19 bn deal

Vodafone and CK Hutchison have revealed their merger of British operations, a move valued at £15 billion ($19 billion).
Vodafone telecom towerThe announcement, long-awaited since talks were publicly disclosed in October, will now initiate a comprehensive investigation by regulators.

In an effort to gain support from politicians, unions, and competition authorities, the two companies have committed to investing £11 billion in Britain over the next decade to establish a cutting-edge standalone 5G network, touted as one of the most advanced in Europe.

According to the agreement, Vodafone will hold a 51 percent stake in the combined group, with Hutchison owning the remaining 49 percent. The newly formed entity will be led by Ahmed Essam, the current CEO of Vodafone UK, while Darren Purkis, the finance chief of Hutchison’s Three UK, will assume the same role in the merged organization.

Surpassing BT’s EE and VM O2 (a joint venture of Telefonica and Liberty Global), the combined operator will serve approximately 27 million customers.

Vodafone, presently the third-largest mobile operator in the UK, and Hutchison, occupying the fourth position, have also established provisions that would enable Vodafone to acquire the 49 percent stake held by the Hong Kong-based conglomerate in the future.

Given the historical opposition to reducing the number of networks in major markets from four to three, the deal will face considerable scrutiny from regulators.

Margherita Della Valle, Vodafone’s new CEO, expressed her belief that the creation of a sustainable and highly competitive third major operator would benefit the UK, fostering growth, employment, and innovation. The deal is expected to be finalized by the end of 2024, pending regulatory and shareholder approval, during which time Vodafone assures customers of both companies will experience improved network coverage within the first year.

Vodafone emphasized that customers would not incur additional costs and that flexible, contract-free options with no annual price increases, as well as social tariffs, would be made available.

Canning Fok, Co-Managing Director of CK Hutchison, stated that Three UK and Vodafone UK lacked the necessary scale to generate satisfactory returns on their investments. The merger, he believes, will provide the required scale to deliver a top-tier 5G network, revolutionizing mobile services for customers and presenting new opportunities for businesses across the UK.

The combined entity anticipates saving over £700 million annually by integrating networks by the fifth year following the completion of the merger.

After the announcement of the deal, shares in Vodafone, which had previously fallen to a 25-year low of 71 pence, rose by 3.6 percent.