The anticipated £15 billion (approximately $19.5 billion) merger between Vodafone (VOD, Financial) and Three UK, a subsidiary of CK Hutchison, is likely to gain approval. This is contingent on both companies committing to substantial upgrades of the UK's mobile network. The UK's Competition and Markets Authority (CMA) has indicated that they should ensure consumer protection against price increases.
The CMA has tentatively concluded that a dedicated network investment plan would significantly enhance the quality of the merged company's mobile network and encourage competition among mobile network operators. A final decision on the merger is expected by December 7.
In June 2023, CK Hutchison, owned by Li Ka-Shing, announced a binding agreement with Vodafone to consolidate their telecommunications operations in the UK. A joint venture will be formed with Three UK and Vodafone UK becoming its subsidiaries. Vodafone and CK Hutchison Group Telecom Holdings Limited will own 51% and 49% stakes, respectively, in the new entity.
According to insiders, the merger's equity valuation will be around £9 billion, with the new company holding approximately £6 billion in debt, bringing the enterprise value to about £15 billion. If successful, this would create the UK's highest revenue-generating mobile operator.
Analyst Karen Egan from Enders Research remarked that the merger would benefit the UK, noting that blocking the deal would not yield positive results for the economy or consumers. Vodafone has committed to investing £11 billion in the merged company, with the UK's communications regulator overseeing the plan's execution. Due to increased competition in the wholesale market, mobile user prices are expected to remain stable or decrease. Both companies stated that the merger presents a unique opportunity to transform the UK's digital infrastructure, which lags behind its European counterparts.
