No cash consideration will be paid, with the Vodafone UK and Three UK businesses contributed with differential debt amounts at completion to achieve ownership of 51:49 between Vodafone and CKHGT.
The merged company will have a six-person board, comprising three directors appointed by Vodafone and three directors appointed by CK Hutchison. Current Vodafone UK CEO Ahmed Essam will become CEO of the combined company, and current Three UK CFO Darren Purkis will take the role of CFO.
Margherita Della Valle, chief executive, Vodafone Group, said, “The merger is great for customers, great for the country and great for competition. It’s transformative as it will create a best-in-class – indeed best in Europe – 5G network, offering customers a superior experience.
“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. For Vodafone, this transaction is a game changer in our home market. This is a vote of confidence in the UK and its ambitions to be a centre for future technology.”
Ahmed Essam, chief executive, Vodafone UK, commented, “The combination of Vodafone UK and Three UK will bring more choice and better value to customers nationwide. With scale to invest, we will create a best-in-class 5G network, supporting the Government’s 5G ambitions, drive digital transformation and create jobs.
“Through converged offers we will really challenge the two largest operators and, of course, we will continue to support the most vulnerable in society with our social tariffs and our commitment to help 6 million people cross the digital divide by 2025.”
Robert Finnegan, CEO of Three UK, added, “Today’s news marks a significant step in our efforts to create a business that will build the biggest and fastest 5G mobile network in the country.
“The combination of Three UK and Vodafone UK will bring the advantages of 5G to every business and household in the UK, enabling the UK to deliver its ambitions for digital and economic growth and fully supporting the UK Government’s objectives for a world-leading digital economy.”
The transaction is expected to close before the end of 2024, subject to regulatory and shareholder approvals.
Kester Mann, director, consumer and connectivity, CCS Insight, gave an analyst’s perspective on the potential impact of the deal.
He explained, “This long-awaited mega merger represents the biggest shake-up in the UK mobile market for over a decade. The deal makes plenty of sense as both providers are sub-scale. As separate entities, it would have been near impossible for either to grow enough organically to come close to challenging BT or Virgin Media O2 for size. Inevitably however, there will be widespread fears over job cuts.
“An £11 billion network investment plan will seek to allay regulatory concerns. But this deal will still face a major challenge to win approval. At this stage, I believe it is too difficult to call either way. The prospect the deal leads to higher prices will be a major concern for the CMA. Vodafone and Three may have shot themselves in the foot by recently hiking tariffs by up to 14.4 per cent.
“My view is that the deal should be approved. It is better to have three strong providers than two that are dominant and two that are sub-scale. Blocking it could thwart the long-term development of the UK’s telecoms infrastructure.”