Vodafone and Three UK confirm merger

Vodafone and Three’s owner CK Hutchison have agreed their long-anticipated UK merger. Vodafone will hold a 51% stake in the combined company, with CK Hutchison Holdings taking 49%.

Vodafone CEO Margherita Della Valle, whose ascension to the top role in the international fixed and mobile service provider has been seen as instrumental to seeing the deal through, said that the merger would be “great for customers, great for the country and great for competition”.

Vodafone said that the merged company would reach for than 99% of the UK population with its 5GH network, delivering a sixfold increase in average data speeds by 2034.

The partners have committed to invest £11 billion in the UK over 10 years to create an advanced 5G network, which they say will deliver up to £5 billion a year in economic benefits by 2030.

Vodafone and CK Hutchison are pitching the deal as “great for competition”, arguing that it will create a third operator with scale necessary to take on the two major converged players – BT/EE and Virgin Media O2.

The pair said they would offer fixed wireless access via the 5G network to 82% of homes by 2030, complementing access to a fibre footprint.

The cash-free deal includes a put option for Vodafone to acquire CK Hutchison’s 49% stake. The merger is expected to close by the end of next year if it is approved by shareholders and – crucially – regulators.

Unlike their rivals, Vodafone and Three do not currently offer TV as part of their services, although Vodafone launched an offer combining unlimited broadband and data with Apple TV 4K in 2019.

“The merger is great for customers, great for the country and great for competition. It’s transformative as it will create a best-in-class – indeed best in Europe – 5G network, offering customers a superior experience. As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear £11 billion network investment plan – driving growth, employment and innovation. For Vodafone, this transaction is a game changer in our home market. This is a vote of confidence in the UK and its ambitions to be a centre for future technology,” said Della Valle.

“Today’s announcement is a major milestone for CK Hutchison and for the UK. Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital. This has long been a challenge for Three UK’s ability to invest and compete. Together, we will have the scale needed to deliver a best-in-class 5G network for the UK, transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the UK. This will unlock significant value for CK Hutchison and its shareholders, realise material synergies, reduce net financial indebtedness and further strengthen its financial profile,” said Canning Fox, group co-managing director of CK Hutchison.