Vodafone and Three in merger talks

It follows media speculation yesterday (3 October) that the two were discussing a potential merger. 

The deal would involve both companies combining their UK businesses, with CK Hutchison owning 49% and Vodafone 51% of the combined firm. By merging, the pair believe it would give them the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and small businesses. 

Such a merged business, according to the parties, would also challenge the two already consolidated players for all UK customers and “bring benefits” through “competitively priced” access to a 5G network in the UK. 

There is, however, no certainty that any transaction between the two companies will ultimately be agreed and a further announcement will be made when appropriate. 

Responding to the news, James Robinson - a senior analyst at communications markets researcher Assembly Research - said the deal between the two could raise several competition concerns. 

In a post on LinkedIn, he explained that the Competitions and Marketing Authority (CMA) - which would likely have to review this transaction - took issue with a similar proposal for “consolidation” before and there’s little indication that its position has shifted since. 

He added: “While the parties might view consolidation as a way to improve returns and unlock shareholder value, we expect the CMA would be eager to protect against the risk of consumer price rises - particularly in light of the current cost of living crisis. 

“We would therefore expect this issue to be the most contentious point within a Three/Vodafone merger, and would potentially require legally binding concessions.”