A merger of the two companies would give them the largest network in the UK.
Vodafone is in talks with CK Hutchison about merging their businesses in Britain, according to a report in Reuters. The merger would create a market-leading mobile network that could accelerate the deployment of 5G services and expand broadband availability, the report says.
Vodafone said on Monday it would own 51 percent and Hutchison 49 percent under the deal being discussed, with the stakes achieved by adjusting ownership of debt rather than exchanging cash. Combining Vodafone UK and Hutchison’s networks would create a business with about 27 million mobile customers — more than current leaders BT, EE and Virgin Media O2.
“By combining our businesses, Vodafone UK and Three UK will gain 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”, Vodafone said in a statement.
The two companies hope to strike a deal by the end of the year, according to an earlier Sky report. Vodafone Chief Executive Nick Read said in February the company was pursuing mergers in multiple European markets to improve returns where players barely cover the costs of the capital required to invest in networks.
Regulatory objections have subsided post-COVID
Hutchison attempted to buy Telefonica’s O2 network in Britain seven years ago but was blocked by regulators. Regulators have previously opposed deals that reduce the number of networks in major markets from four to three, but there have been signals that that position has changed since the COVID-19 pandemic.
Regulators, however, will be reluctant to approve a deal that reduces competition during a cost-of-living crisis, with customers already facing higher bills, analysts have said.
Vodafone said on Monday the merger could bring benefits through “competitively priced access” to larger 5G network, for example for mobile virtual network operators. These players, which include Tesco Mobile and Sky, have built a significant share of the British mobile market.