- Vodafone and CK Hutchison, the owners of three UK mobile networks, have agreed to merge their UK businesses, following talks dating back to last year, the companies announced on Wednesday.
- Vodafone will own 51% of the combined business, leaving CK Hutchison with a minority stake.
A sign outside a Vodafone Group Plc mobile phone store in London, UK
Jason Alden | Bloomberg | Getty Images
Vodafone and CK Hutchison, the owners of three UK mobile networks, have agreed to merge their UK businesses, following talks dating back to last year, the companies announced on Wednesday.
Vodafone will own 51% of the combined business, leaving CK Hutchison with a minority stake.
“This highly anticipated mega-merger represents the biggest shakeup in the UK mobile market in over a decade,” Kester Mann, director of consumer and communications at CCS Insight, said in emailed comments.
The deal makes a lot of sense as both providers are sub-par. As different components, it was impossible to get close enough to challenge BT or virgin media O2 to grow organically enough. There is widespread fear of job cuts.
Current Vodafone UK CEO Ahmed Issam will lead the new organisation, while current Tri UK Chief Financial Officer (CFO) Darren Purkiss will take the CFO position of the combined business.
Vodafone has been going through a transition period since its former CEO, Nick Read, stepped down late last year. Vodafone appointed Margherita Della Val as permanent CEO in April to transform the business.
The combination of Vodafone’s UK business and Three UK will reduce the number of mobile operators to just three after a period of consolidation in the telecommunications sector over the past few years.
Vodafone and three of its biggest rivals, EE and O2, owned by BT, were jointly owned by Telefonica and Liberty Global. BT acquired EE in 2016, Telefonica and Liberty Global Virgin Media launched O2 in 2021.
The deal will need approval from the UK’s Competition and Markets Authority (CMA), which has become increasingly aggressive and blocks large mergers and acquisitions. Last month, the CMA moved to block Microsoft’s $69 billion acquisition of gaming firm Activision Blizzard.
The merger took place in 2010. It’s expected to be completed before the end of 2024 and remains subject to regulatory and shareholder approval — leaving some analysts questioning whether it will cross the finish line.
In the year In 2016, the European Commission blocked three British telecommunications companies from taking over O2 over competition concerns, setting a potentially challenging precedent to overcome.
“This will be a tough sell as both companies have been growing the market over the last year or so,” said Paolo Pescatore, technology, media and telco analyst at PP Foresight. “Let’s see if the authorities have a change of heart. Both sides need to demonstrate that this is in the best interests of UK plc, the economy and consumers for it to get a chance to get off the ground.”
Vodafone and CK Hutchison said the benefits of the partnership would “deliver up to £5 billion a year in economic benefits, create jobs and support the digital transformation of UK businesses” and that “every school and hospital in the UK could have standalone 5G by 2030”.
To sweeten the deal’s appeal to regulators, the new combined company will invest 11 billion pounds ($13.91 billion) in the UK over 10 years “to create Europe’s most advanced stand-alone 5G networks,” the British government has targeted.
“The £11 billion network investment plan seeks to avoid regulatory concerns. But this deal still faces a big challenge to be accepted. At this stage, I believe it is very difficult to call either way,” said CCS Insight Man.