Vodafone, CK Hutchison unveil $19 billion of UK mobile merger

Vodafone and CK Hutchison finally unveiled the 15 billion pound ($19 billion) merger of their British operations on Wednesday, saying the creation of the country’s largest mobile operator would be good for the economy.

The long-awaited announcement came after the two companies publicly revealed they were in talks in October, and will now trigger a lengthy and intense investigation from regulators.

Seeking to win over politicians, unions and the competition authorities, the two groups said they would invest 11 billion pounds in Britain over 10 years to create what they described as “one of Europe’s most advanced standalone 5G networks”.

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 companies said.

The finance chief of Hutchison’s Three UK, Darren Purkis, will take the same role in the new group.

The combined operator will have about 27 million customers, overtaking BT’s EE and VM O2, jointly owned by Telefonica and Liberty Global.

Vodafone, which is currently Britain’s third-biggest mobile operator, and fourth-placed Hutchison will have options which would allow Vodafone to acquire the Hong Kong-based conglomerate’s 49 per cent stake in the future.

The deal will face prolonged scrutiny from regulators who have previously opposed deals that reduce the number of networks in major markets from four to three.

“As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator - with a clear 11 billion pound network investment plan - driving growth, employment and innovation,” Vodafone’s new CEO, Margherita Della Valle, said.

Vodafone said customers of both companies would enjoy better network coverage within the first 12 months of the deal closing, expected before the end of 2024, subject to regulatory and shareholder approval.

It said customers would not face extra costs, and there would be flexible, contract-free offers with no annual price increases, plus social tariffs.

CK Hutchison Co-Managing Director Canning Fok said Three UK and Vodafone UK lacked the scale to make a return on their investment currently.

“Together, we will have the scale needed to deliver a best-in-class 5G network for the UK, transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the UK,” he said.

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 per cent after the deal was announced.

Vodafone will present its British merger deal with CK Hutchison to Britain’s competition regulator in the coming weeks, the London-listed company’s UK CEO said on Wednesday.

Ahmed Essam said the companies had not pre-notified the Competition and Markets Authority about the deal.

“As we go into the coming weeks, we are going to bring the case to the CMA. We believe that this case stands on very strong grounds,” Essam told reporters after the deal was announced. “We’re very confident on our case.”

Hong Kong-listed Hutchison’s Three UK boss Robert Finnegan pointed out that the planned 11 billion pound ($13.91 billion)investment in its 5G network in the UK from the merger was substantially higher than rivals’.

He added that while the company would not exit Britain if the deal were to be blocked by the regulator, its investment would be reduced.

Vodafone and CK Hutchison unveiled the merger of their British operations, creating the country’s largest mobile operator.