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Vodafone and Three £15bn UK merger announced


Vodafone and CK Hutchinson, owner of Three, have announced their long-awaited UK merger today.

The new group ‘MergeCo’, now the UK’s biggest mobile operator, was revealed this morning and is valued at £15bn, according to Sky News’ Mark Kleinman.

MergeCo is 51 per cent Vodafone owned and 49 per cent CK Hutchinson owned.

Vodafone chief exec, Margherita Della Valle, said the deal 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”, she said.

MergeCo plans to invest £11bn in its UK 5G network which could in turn generate £5bn per year by 2030 as well as bolstering the digital transformation of businesses across the nation.

The broadband will extend to almost the entire population with data speeds six times faster by 2034.

Last year the companies said the stakes would be achieved by adjusting the ownership of debt instead of via cash exchange.

Canning Fok, director at CK Hutchison, called the announcement a “major milestone” for 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,” he added.

Previously, “cumbersome” leadership was blamed for the slow deal.

Speaking about the announcement Professor Suzanne Rab, competition law barrister at Serle Court chambers, said: “The transaction has yet to be approved by regulators, and it can be expected that the Competition and Markets Authority will scrutinise it closely.

“The merger revisits the question of how many mobile operators are needed to maintain competitive markets. The UK has a history of aggressive mobile competition prompting commentators to speculate that if a four-to-three merger cannot be approved here, then the hopes for similar consolidation in the mobile sector may now be more limited. There are however already precedents for allowing consolidation from four-to-three players in other countries, for example the merger between KPN and the Telfort in the Netherlands.

“The CMA is likely to look at the impact on consumer choice and prices, as well as the implications for development of future infrastructure, including 5G. A further area concerns the impact on mobile virtual network operators, or “MVNOs” to the extent that the transaction would reduce the number of operators effectively willing to host MVNOs on their networks.

“It’s been argued that the merger would in fact be efficiency-enhancing, leading to much needed investment in 5G in the sector. In the current economic climate, it is perhaps understandable that merging parties would lay claim to such efficiencies to support a more moderated view of a merger between the larger players. It is also understandable that regulatory authorities will continue to want to be assured that such efficiencies are clearly substantiated by robust economic evidence and argument.”

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