 "Vodafone")
Paul Sandle & Clare Jim
Vodafone and CK Hutchison finally unveiled the 15 billion pound ($19 billion) merger of their British mobile operations on Wednesday, saying the creation of a new market leader would drive competition and investment in the country.
The long-awaited deal, after the two companies disclosed talks in October, will now trigger prolonged scrutiny by the anti-trust regulator into whether an operator with 27 million customers could lead to higher mobile prices.
Seeking to win over politicians, unions, and the competition authorities, the two groups said they would invest £11 billion to create what they described as “one of Europe’s most advanced standalone 5G networks”.
Vodafone’s new CEO, Margherita Della Valle, said the deal was a “game changer” in its home market. “The UK will benefit from the creation of a sustainable, strongly competitive third operator with a clear £11 billion network investment plan over 10 years driving growth, employment and innovation.” Under the terms, Vodafone will own 51 per cent and Hutchison 49 per cent of the combined group, which will be led by current Vodafone UK boss Ahmed Essam. The finance chief of Hutchison’s Three UK, Darren Purkis, will take the same role.
Vodafone, UK’s third-biggest operator, will have an option to buy-out the Hong Kong-based conglomerate three years after completion, if it agrees.
PROLONGED SCRUTINY
More From This Section
The deal will face intense scrutiny from regulators who have previously opposed deals that reduce the number of networks in major markets from four to three. Hutchison's attempt to merge with Telefonica's O2 in Britain seven years ago was blocked.
The companies will present the deal to Britain's Competition and Markets Authority (CMA) in the coming weeks.
"We believe that this case stands on very strong grounds," Vodafone's Essam told reporters, adding that customers would be getting a much better network for the same price. "We're very confident on our case."
Hutchison's Three UK boss Robert Finnegan pointed out that the planned investment was substantially higher than rivals, and while a rejection by the CMA would not lead to Hutchison exiting Britain, it would have to reduce investment.
However the deal will still face many hurdles.
"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," a CMA spokesperson said.
Unite, one of Britain's biggest trade unions, said it would lead to higher mobile phone bills and job cuts, and questioned whether a company with close ties to China should have such a prominent place in UK telecoms infrastructure.
"The government must step in and stop this reckless merger and Unite is building a cross-party coalition to demand they do so," said Gail Cartmail, executive head of operations for Unite.
Vodafone said customers of both companies would enjoy better network coverage within 12 months of the deal closing, expected before the end of 2024, subject to regulatory and shareholder approval.
The two groups said they would be able to save more than 700 million pounds a year by combining networks by the fifth year after completing the deal.
Shares in Vodafone, which fell to a 25-year low of 71 pence on Tuesday, rose 3.6% after the deal was announced.
Hutchison was advised by Moelis and HSBC, while Morgan Stanley and Robey Warshaw advised Vodafone.
