Vodafone (VOD, Financial) and CK Hutchison's UK subsidiary, Three UK, are on the verge of securing approval for their £15 billion (approximately $19.5 billion) merger. The key condition for this approval is the companies' commitment to a significant investment in upgrading the UK's mobile network infrastructure.
The UK Competition and Markets Authority (CMA) has indicated that both companies need to implement measures to protect consumers from potential price hikes. Initially, the CMA found that the proposed network investment plan would significantly improve the quality of the merged company's mobile network and enhance competition among mobile network operators. A final decision from the CMA on the Vodafone-Three UK merger is expected soon.
In June 2023, CK Hutchison, owned by Li Ka-shing, announced a binding agreement with Vodafone to integrate their telecom operations in the UK. They plan to establish a joint venture where Three UK and Vodafone UK will become subsidiaries. Vodafone and CK Hutchison's European telecom entity, CKHGTH, will hold 51% and 49% of the joint venture, respectively.
Sources estimate that the merger will value the combined company's equity at around £9 billion, with approximately £6 billion in debt, bringing the enterprise value to about £15 billion. If completed, this merger would create the UK's largest mobile operator by revenue.
Analysts, such as Karen Egan from Enders Research, believe that if the merger gains approval, it will benefit the UK, noting that blocking the deal would not provide positive outcomes for the economy or consumers.
Vodafone has committed to investing £11 billion into the merged entity and is open to having the UK communications regulator supervise the implementation of this plan. They also anticipate that increased competition in the wholesale market will keep consumer prices stable or potentially lower. A joint statement from the companies highlighted that the UK's digital infrastructure significantly lags behind its European counterparts and described the merger as a unique opportunity to transform the UK's digital landscape.
