Vodafone and Three are merging their UK operations

15 Jun 2023

Image: © Ascannio/Stock.adobe.com

The companies said the merged company will be better equipped to handle rolling out 5G, though the deal may face issues with regulators.

Vodafone and Three have entered binding agreements to combine their UK operations, which will lead to the creation of the biggest mobile operator in the country.

The combined business will have more than 27m subscribers, pushing it past BT’s EE and Virgin Media’s O2. Vodafone will own 51pc of the new business, while Three will own the remaining 49pc.

No cash is being paid as part of the merger deal, which is expected to close before the end of 2024 if regulators and shareholders approve.

The new company plans to invest £11bn over a 10 year period to accelerate the roll-out of 5G across the UK. This was one of the main goals of the merger when it was first announced last year, with Vodafone claiming a merged company would be better equipped to handle the costs of a 5G roll-out.

The two companies also said the deal will benefit customers by improving the coverage and reliability of their combined network. Vodafone Group CEO Margherita Della Valle said the deal will be “great for customers, great for the country and great for competition”.

“For Vodafone, this transaction is a game changer in our home market,” Della Valle said. “This is a vote of confidence in the UK and its ambitions to be a centre for future technology.”

Last month, Vodafone revealed plans to cut 11,000 jobs globally over the next three years, as the company reported a performance slowdown. Della Valle said the company’s performance had “not been good enough” and that her priorities for the company are “customers, simplicity and growth”.

Under the current deal, the current Vodafone UK CEO Ahmed Essam will become the merged company’s CEO, while Three UK CFO Darren Purkis will take the role as CFO for the new company.

Regulatory hurdles

While the two companies have agreed on the merger, the deal still faces threat of being blocked by regulators in the UK.

Last year, Kester Mann, consumer and connectivity director at market research firm CCS Insight, said regulation would be a “major hurdle” if any deal begins to materialise.

UK telecoms regulator Ofcom has previously been outspoken against major mergers in this sector, blocking Three UK’s attempted £10.5bn takeover of 02 in 2016.

But in February 2022, the regulator made a statement that appeared to soften its stance on mergers, giving rise to the possibility that other competitors could combine their businesses in future.

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Leigh Mc Gowran is a journalist with Silicon Republic