LONDON: Vodafone, one of the leading mobile phone companies, has revealed plans to merge its British operations with Three UK, owned by CK Hutchison based in Hong Kong. The move aims to accelerate the rollout of faster 5G connectivity in the UK, following the challenges posed by the ban on Huawei, a major equipment supplier for mobile networks, by the British government.
Vodafone and CK Hutchison released a joint statement announcing their intention to create a new combined group with an estimated value of £16.5 billion ($21 billion) upon completion of the deal, which is expected to be finalized by next year. The merger is seen as a positive step for customers, the country, and competition, according to Vodafone CEO Margherita Della Valle. She emphasized the transformative nature of the merger, highlighting the creation of a superior 5G network that would provide customers with an exceptional experience.
The merger is also expected to drive network investment, with a commitment of £11 billion over ten years, as stated in the joint statement. Canning Fok, group co-managing director of CK Hutchison, emphasized the significance of the collaboration, stating that it would enable the new group to deliver a top-notch 5G network in the UK, ultimately transforming mobile services for customers. Fok also noted the value creation for CK Hutchison and its shareholders, including the realization of synergies, reduction of net financial indebtedness, and strengthened financial profile.
Vodafone to Hold 51 Percent Stake
The transaction will result in Vodafone holding a 51 percent stake in the combined group, while CK Hutchison will possess the remaining portion. However, the merger is subject to approvals from both shareholders and regulators. Analysts, such as Dan Ridsdale from Edison Group, suggest that Vodafone appears more concerned about regulatory approval based on their statement.
If approved, the merger will create a new player in the market, pitting the combined group against the two largest mobile operators in the UK, BT EE and Virgin Media O2. Ridsdale noted that Vodafone’s release reads like an overt pitch to gain support, emphasizing the benefits for customers, the country, and competition, in addition to the deal synergies.
According to the joint statement, the merger is expected to deliver economic benefits of up to £5 billion per year by 2030, generate employment opportunities, and support the digital transformation of businesses in the UK. The statement further highlights the goal of providing standalone 5G access to every school and hospital in the country by 2030.
The decision to ban Huawei’s involvement in the UK’s 5G network rollout was made in 2020, citing concerns raised by the United States regarding potential espionage activities. British Prime Minister Rishi Sunak recently expressed concerns about countries like China and Russia manipulating or exploiting intellectual property, employing technology for authoritarian purposes, or withholding vital resources like energy.
The proposed merger between Vodafone and Three UK signifies a significant development in the UK’s telecommunications landscape, with the aim of bolstering 5G connectivity and advancing digital transformation in various sectors.
