- Vodafone has confirmed that it is in talks with Hong Kong-based CK Hutchison about a possible merger of its UK business with Three UK.
- Vodafone said the potential deal would involve both companies combining their UK businesses, with Vodafone owning 51% and CK Hutchison owning the remainder of the combined business.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
‘’The response to the confirmation of recent merger discussions was lukewarm with the shares up 1.6% by lunchtime but down 3.8% on a five day view. This may be due to the significant regulatory hurdles ahead for the deal, as the authorities weigh up the potential ceding ownership of more core UK infrastructure to an overseas owner, but also perhaps the terms, with some analysis suggesting that Vodafone’s market share is almost double that of Three’s. This development follows a defined trend of mega mergers in the sector with only four major operators still remaining. Those left are already collaborating in areas such as remote rural areas where cost synergies are required given the low population density. The aim of this merger would be to create a company with bigger scale to fully capitalise on the opportunities provided by the 5G roll out. Setting up and maintaining networks is a hugely expensive business and as government have a track record of raising prices more than expected when companies bid to use chunks of the spectrum, Vodafone has recognised it needs to bulk up with much more power to be able to accelerate the rollout of 5G and expand connectivity to rural communities and small businesses. Clearly much still needs to be agreed and it’s far from certain that this is a done deal, but if it is signed the joint venture with Three UK would create the biggest player in the UK mobile industry. Vodafone has long been focused on rolling out broadband, fixed line and TV services across its European markets, since customer retention is significantly better among those taking multiple products, and a successful 5G rollout will be crucial to that strategy.’’
