Vodafone-Three: Ringing endorsement

Vodafone and Three are the United Kingdom’s third and fourth largest mobile telecoms companies respectively and the tie-up, which is expected to close in the first half of 2025, will lead to the emergence of Britain’s biggest operator by revenue, ahead of BTEE and Virgin Media O2.

Speaking to Bloomberg in December, Vodafone Group CEO, Margherita Della Valle, stressed the deal – which will see Vodafone own 51% of the combined company and have the right to buy the remainder after three years – was not about boosting revenue or cutting costs, but rather increasing competition and investment in the UK telecoms sector.

“The rationale of the merger is to unlock infrastructural investment. With the combination between Vodafone and Three, we unlock scale in our networks, which is what will allow us to build the biggest and best network in the UK, reaching 99% of the UK population.”

In a statement Canning Fok, chairman of CK Hutchison Group Telecom Holdings, which owns Three, echoed her sentiments: “When Three and Vodafone are combined, CK Hutchison will fully support the merged business in implementing its network investment plan… transforming the UK’s digital infrastructure and ensuring customers across the country benefit from world-beating network quality.”

Regulators had been skeptical about the proposed tie-up, holding firm to a position that the UK needed four cellphone companies to ensure competition and keep consumers' bills down

Vodafone and Three have committed to spend $14 billion of their own cash to build a state-of-the art 5G network serving 50 million customers (their own 27 million customers, plus those of rival Virgin Media, following the signing of a long term network-sharing agreement between the two operators last July).    

Winning the approval of the Competition and Market’s Authority (CMA) brings to a close an 18-month-long merger saga, during which rival UK telecoms operators and the regulators expressed strong misgivings about the deal.

The CMA had been skeptical about the proposed tie-up, holding firm to a position that the UK needed four cellphone companies to ensure competition and keep consumers’ bills down. Speaking to Sky News in September, the CMA’s director, Stuart McIntosh, stated, “We are concerned that the merger will push up customer bills and lead to increases in prices across the market, because of the reduction in competition. Both companies have argued quite strongly that they would make significant new investments in the network, with 5G technologies, and that those will lead to quite significant improvements in services throughout the UK. And we agree, to some extent. However, we are not convinced that they will necessarily follow through fully in the investments that they say they will make.”

Dialed in
After listening to the mood music coming out of Cabot Square, Vodafone and Three made a series of legally binding commitments in order to secure the CMA’s approval. These included the delivery of a joint network plan, which sets out the integration and improvements Vodafone and Three will make to their combined network across the UK over the next eight years; capping selected mobile tariffs and data plans for three years; and freezing prices and contract terms for wholesale services, again for a period of three years.

Market analysts believe that the deal will allow the UK catch up with other developed countries in terms of the quality of 5G connectivity. It is the latest in a series of blockbuster telecom mergers in the UK in recent years. BT acquired EE for $15 billion in 2016, and in 2021 the CMA approved the $43 billion merger of Virgin Media and O2.