It’s official: Vodafone and Three to tie the knot in the UK
- Reference: 1686745925
- News link: https://www.theregister.co.uk/2023/06/14/its_official_vodafone_and_three/
- Source link:
Vodafone and Three UK were reported to be in merger talks since at least [1]last October , but now Vodafone Group and Three owner CK Hutchison Group have announced a binding agreement to combine their UK operations, with Voda owning 51 percent of the resulting company and Hutchison 49 percent.
The merger is expected to create a third telecoms operator in Britain with the scale to be able to compete against BT and Virgin Media O2, which have already swallowed other mobile operators. The resulting company has yet to have an official name, and is currently referred to as "MergeCo."
[2]
Voda and Three have given an undertaking that the combined business will invest £11 billion ($13.9 billion) over 10 years to create "one of Europe's most advanced standalone 5G networks," and claimed the merger will deliver up to £5 billion per year ($6.32 billion) in economic benefit by 2030.
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In a statement, Vodafone Group chief executive Margherita Della Valle hailed the move as "great for customers, great for the country and great for competition," and said the UK will benefit from the creation of a competitive third operator to drive growth, employment and innovation.
CK Hutchison Group co-managing director Canning Fok said the announcement is a milestone, and conceded that "Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital." However, post-merger "we will have the scale needed to deliver a best-in-class 5G network for the UK," he added.
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Kester Mann, director of Consumer and Connectivity at CCS Insight agreed on that point, telling us the deal makes plenty of sense as both providers are sub-scale on their own.
"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," he added.
Indeed. Vodafone says the merger "is expected to result in substantial efficiencies" that are expected to amount to "more than £700 million of annual cost and capex synergies."
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Mann also cautioned the deal will face a major challenge to win approval from the UK's competition watchdog.
"The prospect that the deal might lead to higher prices will be a major concern for the Competition and Markets Authority (CMA)," he said, adding that "Vodafone and Three may have shot themselves in the foot here by recently hiking their tariffs by up to 14.4 percent."
[7]UK watchdog won't block Openreach's discount fiber pricing
[8]Billionaire BT stalker Patrick Drahi increases stake to 24.5%
[9]Telco giant Vodafone to cut 11,000 staff as part of its turnaround plan
[10]Spain gets EU cash to test next gen network, and US 'scrum for 6G' already under way
PP Foresight telecoms analyst Paolo Pescatore said the merger will be a hard sell for regulators, and both parties need to demonstrate the merger is genuinely in the interest of UK plc, the economy, and consumers.
"Ofcom recognises the challenges of the UK mobile market and the need for scale. Convincing the CMA will be the real test," he said, adding that "current investment levels are not sustainable in the longer term," and warning that concessions on wireless spectrum allocations will have to be made.
Vodafone and Three said the combined business will be able to reach more than 99 percent of the UK population with the resulting 5G network, and promised a six-fold increase in average data speeds by 2034. It is also intended to offer fixed wireless access to 82 percent of households by 2030 to complement fiber offerings.
The merger is expected to be complete before the end of 2024, subject to regulatory and shareholder approvals. The current Vodafone UK CEO Ahmed Essam is to become CEO of the combined business with the CFO role taken by Three UK CFO Darren Purkis. ®
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[1] https://www.theregister.com/2022/10/03/vodafone_uk_and_three_uk/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZInkHXy4S39uU@7XzT4PmQAAAQc&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZInkHXy4S39uU@7XzT4PmQAAAQc&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZInkHXy4S39uU@7XzT4PmQAAAQc&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZInkHXy4S39uU@7XzT4PmQAAAQc&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZInkHXy4S39uU@7XzT4PmQAAAQc&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2023/05/24/uk_regulator_openreach_discount/
[8] https://www.theregister.com/2023/05/23/altice_uk_bt_stake/
[9] https://www.theregister.com/2023/05/16/vodafone_to_shed_11000_fy_2022/
[10] https://www.theregister.com/2023/04/26/enable6g_project/
[11] https://whitepapers.theregister.com/
Will it really improve coverage?
No. For example, the rural area I live in (200+ properties) has no real coverage from any of the networks (they all claim it, at first, but it's of the "you may have to use it outside" when you dig deeper).
All that I can see happening here is the number of unavailable services will reduce by one.
Re: This merger *will* reduce consumer choice *and* increase costs
Vodafones Smarty equivalent is Voxi, depending what exactly you need unlimited data for, it is broadly comparable.
They claim their current market share renders them incapable of competing with the scale of their two primary rivals, I could believe that given some of their financials and anecdotal evidence based on network performance. In my home town, Three has very strong signal but zero data flow on one side, they are aware of the problem and "have no plans to improve the network". Arguably between them they have some spectrum you could force them to give up, mostly the high frequency 5G Three has in excess, perhaps a new player might fancy another shot at a wireless broadband play.
Same in Durham
I quite often get a strong signal, but no data.
Don't fancy their chances of getting this past CMA given Three's merger with O2 was vetoed on the grounds of number of network providers dropping from 4 to 3
The resulting company has yet to have an official name
Well, if you're going to be honest to your customers, call it Vodafee.
Re: The resulting company has yet to have an official name
"Well, if you're going to be honest to your customers, call it Vodafee".
I've heard they're going to combine the names. From Vodafone they'll take "Vodafon" and from Three "e".
Re: The resulting company has yet to have an official name
Or ThrOne?
Re: The resulting company has yet to have an official name
Game of …
Re: The resulting company has yet to have an official name
ThreeFone
Coverage - Mast sharing
Three have a mast sharing deal with EE - so EE and Three work here, but Vodafone and O2 don't (hence no Smart Meters either - they are Telefonica/O2 only "down south"). Get out of the village and we can see the Vodafone mast, so inverse coverage!
Would a Vodafone/Three merger result in losing the EE mast share = worsen choice?
I know market forces and all that, but surely one national fault tolerant Mobile provider is the way to go - think of all the duplicate resources that are wasted having multiple providers putting a masts up all over to provide "choice" - all needing power - all pushing up CO2? We got one PowerGrid, one water delivery network, one sewage network, why not one comms network??
Re: Coverage - Mast sharing
"surely one national fault tolerant Mobile provider is the way to go"
A single network can never provide customers with redundancy, it's not like power or water where you can have a local backup. Let alone all the issues that would cause with monopoly pricing. See for example Australia's NBN.
Re: Coverage - Mast sharing
I remember when we used to have only one comms network in the UK. So efficient you could often get a new phone in under six weeks if it wasn't too much trouble for them...
How is this going to work?
O2 and Three weren't allowed to merge due to competition concerns. How is Vodaphone any different to O2 in that respect?
“great for customers, great for the country and great for competition”. Erm, okay…
Love how anytime two companies merge into one it's supposed to increase competitiveness, which is always spun as better choice for consumers even though it never really turns out like that.
This merger *will* reduce consumer choice *and* increase costs
Bugger - I just moved from Vodafone to Smarty (effectively 3), as Vodafone could not or would not provide a cheap enough 'all you can eat' data package.
As a consumer, I'm not seeing the benefit of this merger. While Vodafone will get access to 3 masts (and vice-versa), will it really improve coverage?
And I can't be the only one to wonder how on the one hand they're (combined) willing to blat £11bn on improving their network over the next 10 years, and then on the other espouse the cost savings of $755m each year...?!?
From my perspective, EE/BT = too Expensive, Virgin Media/02 = too mediocre and Vodafone is costly, but has a lower coverage in some built up areas of the UK (including where my office is right now).
Not seeing how this can be a good thing, except for Vodafone?