Vodafone and Three unveil mega-merger to form UK’s biggest mobile operator

The combined business will overtake Virgin Media O2 and BT-owned EE, with about 27 million customers and more than 11,500 staff.
The combined business will overtake Virgin Media O2 and BT-owned EE, with about 27 million customers and more than 11,500 staff.

Vodafone and Three UK have struck a long-awaited merger deal to create Britain’s biggest mobile phone network worth £15 billion.

FTSE 100-listed Vodafone and Three owner CK Hutchison will combine their UK operations, forming a business with about 27 million customers and more than 11,500 staff.

The merged firm will be majority owned by FTSE 100 listed Vodafone, with 51% of the combined business and CK Hutchison owning the remainder.

Vodafone will have the option to buy out Three’s 49% holding three years after the deal completes, as long as the firm’s value has risen to £16.5 billion.

The tie-up, which comes after talks first began last October, will spark intense scrutiny by UK competition regulators as it will cut the number of major mobile network players from four to three.

It has also attracted criticism from trade unions, with Unite branding it “reckless”, as Vodafone and Three said some jobs will be affected under plans to save more than £700 million annually within five years.

The firms said it was too early to put a figure on the number of roles impacted or say if any offices will close.

It comes after Vodafone last month announced 11,000 jobs would go over the next three years in the UK and worldwide.

But the firms insisted that the deal will boost the combined workforce overall, with 8,000 to 12,000 new roles set to be created in the UK after the merger.

They also pledged to invest £11 billion in the UK over the next 10 years to create one of Europe’s biggest 5G networks, with aims for the new company set to reach more than 99% of the UK population with their 5G standalone network by 2034.

It will help every school and hospital in the UK to have access to standalone 5G by 2030, according to the group.

Margherita Della Valle, chief executive of Vodafone, called the deal a “gamechanger”.

She said: “The merger is great for customers, great for the country and great for competition.

“As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear £11 billion network investment plan – driving growth, employment and innovation.”

“This is a vote of confidence in the UK and its ambitions to be a centre for future technology,” she added.

The companies said that the deal will help them compete with their rivals in the roll-out of 5G and deliver the investment needed.

Without joining forces, they would not be able to compete with their larger UK rivals or be able to put in the investment needed to roll out 5G, they said.

Three and Vodafone merger
Three and Vodafone have announced an agreement to merge their UK networks in a deal to create a European 5G giant (PA)

Ms Della Valle said the deal will “level the playing field”.

The combined Vodafone and Three business will have a combined market share greater than Virgin Media O2 and BT owned EE, which have around 24 million and 20 million mobile customers respectively.

Vodafone and CK Hutchison are aiming to complete the deal by the end of 2024.

The firms outlined plans for “substantial” cost savings after the deal.

This will be through measures including merging IT systems and combining the marketing, sales, distribution and logistics activities, as well as cutting general and administration costs.

The combined business will be headed by Vodafone UK boss Ahmed Essam as chief executive, with current Three UK chief financial officer Darren Purkis taking on the same role at the merged group.

Unite said the Government “must step in and stop this reckless merger”, arguing it will lead to job losses and push up people’s mobile phone bills.

Rocio Concha, director of policy and advocacy at consumer group Which? added: “Reducing the number of network providers from four to three risks reducing the choices available to consumers, raising prices and lowering the quality of services available.”

A spokesman for the Competition and Markets Authority confirmed the regulator was aware of the announcement, “which indicates that the deal will be subject to review by the CMA”.

He said: “Both Vodafone and Three are key players in the UK communications market – with millions of consumers and many businesses relying on their services – so it’s right that the CMA reviews the impact this deal could have on competition.”