Britain’s Competition and Markets Authority (CMA) has approved the merger of Vodafone (LSE: VOD) and Three UK, ending months of regulatory scrutiny. The new entity will be the largest mobile operator in the country, with over 27 million customers.
The £16.5 billion deal consolidates two of the UK’s four major mobile network providers and is expected to be completed in the first half of 2025.
The companies first announced their intention to merge in June 2023.
Three UK is a subsidiary of CK Hutchison Holdings (HKG: 0001), a conglomerate based in Hong Kong.
Conditions
The CMA’s approval is dependent on legally binding commitments from Vodafone and Three:
- Invest £11 billion in 5G upgrades: The merged company is due to roll out a nationwide 5G network over the next eight years, aiming to improve coverage and quality.
- Mobile pricing cap: Selected data plans and tariffs will be capped for three years to protect customers from price increases during the network rollout.
- Fair access for virtual operators: Mobile virtual network operators (MVNOs), such as Sky Mobile and iD Mobile, will be offered pre-set wholesale prices and terms for three years to ensure competitive pricing.
The CMA and Ofcom (short for “Office of Communications”, the UK’s communications regulator) will oversee compliance, with the merged entity required to publish annual progress reports.
Implications
Stuart McIntosh, chairman of the CMA inquiry group, said: “This merger is likely to increase competition in the UK mobile sector… but only if Vodafone and Three implement the proposed measures.”
Margherita Della Valle, CEO of Vodafone, hailed the deal as “an easing of the handbrake on the UK telecoms industry”, while Canning Fok, vice-president of CK Hutchison (owner of Three), highlighted the potential of transformation for the UK’s digital infrastructure.
Vodafone will hold a 51% stake in the merged company, with CK Hutchison retaining 49%. Vodafone could acquire full ownership after three years.
Analysts pointed out that the merger is in line with market consolidation trends, following deals such as BT’s acquisition of EE in 2016 and the Virgin Media-O2 merger in 2021.
While the deal promises substantial investment in infrastructure, critics remain cautious, warning of potential job losses and long-term price increases after initial protections expire.