Vodafone and Three UK closing in on merger


The £15 billion merger would drastically reshape the UK mobile market, creating a new market leader with 28 million customers

This week, a report from The Financial Times suggests that the long-awaited merger between Vodafone UK and Three UK is soon to become reality, with an announcement expected later this month.

Sources suggest that negotiations between the two companies are almost finished, with the deal valued at around £15 billion, around £6 billion of which is debt.

Rumours that the two companies have been considering a merger have been circling for years, though discussions between the two companies were only formally acknowledged in October last year.

Initial outlines suggest that the merger will see majority ownership of the combined entity go to Vodafone with a 51% stake, while CK Hutchison, Three UK’s owner, taking the remaining 49% stake. Rumours even suggest that the deal could be something of a steppingstone for Hutchison to exit the UK market entirely, likely by selling off its minority stake to Vodafone at a later date.

Vodafone’s interim CEO Margherita Della Valle took on the role permanently last month, a move that likely steadied the ship and helped advance negotiations with Hutchison.

Naturally, such a mega merger would present a huge shakeup for the UK telecoms market, shrinking the country’s mobile ecosystem down to just three players.

In the past, regulatory bodies within both the UK and the EU have been loathe to allow just three mobile players in a single market; in fact, this was one of the main reasons why the Telefonica’s O2 was disallowed from merging with Three back in 2016.

In recent years, however, the regulatory landscape has gradually grown more relaxed when it comes to major M&A. Earlier this year, for example, European Commissioner Thierry Breton said there were “no taboos” when it came to mergers in the telecoms space, especially when doing so would encourage cross-market consolidation.

But despite regulators warming to the concept of major telecoms mergers, it seems likely they will still impose some form of restrictions on any tie-up between Three and Vodafone. Exactly what stipulations might be imposed on the two companies is unclear, but they could include price freezes for customers and various network rollout assurances, particularly in rural areas.

How would the merger of Vodafone and Three impact the UK’s telecoms industry?  Join the ecosystem in discussion at this year’s live Connected Britain conference

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