Vodafone and CK Hutchison notify merger plan to CMA

Vodafone and CK Hutchison have formally notified the proposed merger of mobile operators Three UK and Vodafone UK to the UK’s Competition and Markets Authority (CMA) seeking approval of their planned merger.

Source: Vodafone

The pair are highlighting the benefits they argue a merger would bring, with Compass Lexecon producing a paper to itemize these in detail.

Analyst José Padilla argued that the current UK market for mobile featured two scale players that could make a return on the investment needed to unlock the potential of 5G and deliver government broadband policy objectives, and two under-scale players that could not.

Incentive to invest

His paper said that the merger would instead create a third MNO with scale that will have the ability and incentive to invest in 5G standalone and Advanced 5G, with plans to invest over £6 billion during the first five years post-merger, and more than £11 billion across the first 10. He said this would also increase competitive pressure on BT/EE and VMO2 to invest in their networks.

Padilla said that the merged network would, from day one, benefit from greater density of cell sites and extend high-capacity spectrum coverage to an additional 10 million customers.

Robert Finnegan, CEO of Three UK said: “By combining networks, Three UK and Vodafone UK will unlock £11 billion of investment that will help the UK close the 5G gap with leading European countries and realise its ambitions to be a front-runner in digital connectivity. Thanks to this transaction, 95% of the population and every school and hospital will be covered by standalone 5G by the end of the decade.mJoining forces will also yield more immediate benefits. From Day One, our customers will enjoy faster, more reliable coverage over more of the country – and without paying a penny extra.We are confident that this transaction will deliver significant benefits to our customers, the country and competition, and we look forward to working closely with the CMA as they review our notification.”

Ahmed Essam, CEO of Vodafone UK said:  “We have formally submitted our Merger Notice to the CMA, having worked with them closely through the pre-notification process. We look forward to continuing the constructive conversations now that the formal process has begun. We strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players. Our commitment to invest £11 billion will build capacity to meet the exponential growth in demand for data and accelerate the roll out of Advanced 5G across the UK, delivering benefits to consumers and businesses throughout the nation.”

Security risk

The notification comes as Vodafone faces a separate challenge, with the UK government identifying the 14.6% stake held in the telco by the UAE’s e& as a security risk.

The Cabinet Office issued a notice on Wednesday warning of the risk, associated with what is seen as Vodafone’s strategic role in UK telecoms.

It has instructed the telco to set up a security committee to oversee and monitor sensitive work that could have an impact on national security.