Telecom providers Vodafone and CK Hutchison are said to be planning a £15 billion mobile merger in the UK. The deal would signify an unprecedented level of mobile market consolidation in the United Kingdom.
This week the Financial Times reported that UK mobile giant Vodafone and CK Hutchinson, which operates the UK’s Three mobile network, are “poised” to announce a £15 billion combination of their UK telecoms businesses. The FT cited three insider sources for its reporting.
Such a deal would create the country’s largest mobile operator entity, withy over 28 million customers. Sources also confirmed that such a deal would value the equity of the combined group at about £9 billion. In addition, the new company would have roughly £6 billion of debt, which would set the enterprise value of the new organisation to about £15 billion total.
FT projects that the Vodafone-Three deal, which has been in the works since last fall, will be revealed later this month. It is said to follow the appointment of insider Margherita Della Valle as Vodafone chief executive. The appointment of Della Valle, a financial maven who has worked for Vodafone in Italy and the UK for almost 30 years, comes after after “months of uncertainty on who would run the UK telecoms group on a permanent basis”, the sources told FT.
Giving regulators a lot to worry about
While the merge deal may make sense from a business point of view, it opens up a wide range of potential issues for UK regulators. According to the FT, such a deal would “set the stage for a protracted political and competition fight”. The UK’s Competition and Markets Authority (CMA) has generally opposed mergers that could lead to greater concentration of market power. In fact, FT points out that a similar deal between Three UK and O2 was blocked in 2016.
In addition to the antitrust aspect, however, the combination would also allow for Hong Kong-based CK Hutchison to exit the UK telecoms market. FT notes that the UK government has started using its new powers under the National Security and Investment Act to review and sometimes reject transactions by foreign parties relating to British assets “deemed important to national security”.