Vodafone and Three UK owner are now discussing a merger

Vodafone has confirmed that it’s in merger talks with Three UK's parent CK Hutchison, according to a report in The Guardian. The admission comes following a year of grumbling from Vodafone about the costs of running a mobile network. Most recently, in July, Vodafone CEO Nick Read said that the reduction in mobile networks in the UK would be healthier for the sector.

Commenting on the talks, Vodafone issued the following statement:

“Vodafone confirms that it is in discussions with CK Hutchison Holdings in relation to a possible combination of Vodafone UK and Three UK. The envisaged transaction would involve both companies combining their UK businesses, with Vodafone owning 51% and our partner CK Hutchison owning 49% of the combined business.”

The coming together of Vodafone and Three UK will be the third huge merger that the UK has seen over the last decade or so. First, there was T-Mobile and Orange, which came together and formed EE. Then, a few years ago, we had the merger of Virgin Media and O2 to create Virgin Media O2, and now we have talks between Vodafone and Three UK. That’s five major networks shrinking to three in about a decade.

Vodafone went on to explain its motives for it seeking a merger:

“The conditions to ensure thriving competition in the market need to be nurtured, otherwise the UK is at risk of losing the opportunity to be a 5G leader. As Ofcom has identified, some operators in the UK – Vodafone UK and Three UK – lack the necessary scale to earn their cost of capital. By combining our businesses, Vodafone UK and Three UK will gain the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and small businesses.”

Provided the two companies agree to the merger, it will probably have to be approved by the Competition & Market Authority to ensure that the move is not monopolistic. It’s unclear what will happen to MVNOs that rely on these networks such as Smarty and Voxi, but Giffgaff wasn’t affected when its parent, O2, merged with Virgin Media.