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Vodafone UK Allegedly Expressed Interest in Three UK Merger

Monday, January 24th, 2022 (10:25 am) - Score 5,184
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Mobile operator Vodafone UK is allegedly reported to have explored a move to merge with rival Three UK by acquiring them from parent CK Hutchison Holdings. But the expression of interest, which is said to have been made last year, did not lead to an agreement and is no longer part of active negotiations.

At first glance, the idea of a merger between the two operators might seem a bit awkward, not least because both tend to sit at opposite ends of the mobile-only market (i.e. Three UK is more of a low-cost consumer operator, while Vodafone prefers to lean more into the premium and business side). But it’s by no means the first time that Vodafone has mooted the idea.

Last November the CEO of Vodafone, Nick Read, let the market know that he foresaw further mergers and acquisitions in the UK telecoms market, which included a seemingly positive reception (here) to the question of whether or not the regulators (e.g. Ofcom and the CMA) would approve a hypothetical merger with Three UK. Not to mention that Vodafone has already joined with CKH in other markets, such as Australia.

On the flip side, Three UK’s CEO, Robert Finnegan, has similarly expressed hope that regulators will now be more open-minded to mergers. All of this concern stems from the 2016 decision by EU and UK regulators to block the previously proposed merger between Three UK and O2 (here), which ended up being overturned in 2020 by the European Court of Justice (here) – albeit too late for the deal. Since then, O2 has decided to tie the knot with Virgin Media instead. But Brexit has reintroduced some uncertainty over the regulatory climate and Ofcom’s likely position.

According to Bloomberg‘s sources, Vodafone expressed interest late last year in acquiring its smaller rival, but “the approach didn’t lead to an agreement, and it isn’t currently in active negotiations with CK Hutchison.” After the previous mergers between BT and EE, as well as O2 and Virgin Media, it becomes a bit easier to understand why Vodafone and Three UK might find some security together. Other markets around the world have also recently seen a reduction in primary mobile operators from four to three (e.g. Ireland).

As it stands, Vodafone and Three UK appear to not be pursuing the merger idea, which in theory should put an end to the story, at least for now. But the wheels of a competitive market never stop turning and so long as the idea is alive then there may be a time when somebody tries again. The news has also given a mild boost to share prices this morning, which confirms that the financial markets view the idea with some positivity.

Nevertheless, the benefits of such a merger aren’t quite as clear-cut as they were in the case of BT and EE or O2 and Virgin Media, which predominantly reflected a tie-up between fixed line and mobile centric businesses. By comparison, Three UK doesn’t have a fixed line business and Vodafone’s fixed line base largely reflects their partnerships with other networks, such as Openreach and CityFibre.

In short, we can’t see as many benefits for consumers stemming from such a merger (the internal business is another matter), but that would depend upon the detail of such a deal and how much spectrum they were allowed to retain (regulators may require that some spectrum be redistributed to rivals). No doubt the markets’ many virtual operators (MVNO) would also have some big concerns.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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20 Responses
  1. El Guapo says:

    Good god no. Please , no. Three are interested in building 5G infrastructure. Vodafone are not.

    1. John says:

      Are they? News to me, long suffering 3 customer.

  2. Mike says:

    After the Orange + T-Mobile merger, unlimited got dropped,
    and Three followed suite, so this gets a no from me.

  3. Smythe says:

    This merger between Three UK and Vodafone UK needs to happen. In the UK we have appalling quality mobile networks. This would help improve them.

    1. Guest says:

      Only if both 4G and 5G infrastructure/coverage is vastly improved eg the poor Vodafone 5G coverage and the congested Three 4G infrastructure.

    2. Sam P says:

      This is a really bad take. Merging companies is never in the consumers best interest.

      That would leave us with 3 UK networks competing.

    3. Aled says:

      It depends on the primary reason why they wanted a deal.

      As an outsider, the obvious commercial efficiency is that two operators need to build vastly expensive new infrastructure, with considerable overlap in 5G and rural areas (many billions of £ I would assume).

      Tbh I don’t see enough commercial alignment for this to really work.

  4. Sam P says:

    It sounds like Three are becoming desperate.

    I wonder how much the Hauwei ban has effected them?

    1. Mark Jackson says:

      To be fair, it was Vodafone that is said to have formally expressed an interest in Three (not the other way around) and nothing was pursued. So we can’t reach that sort of conclusion from this. Arguably, you could even reach the opposite conclusion.

  5. Jack says:

    As much as I hate Three its best to leave them to there own thing. No more mergers!

  6. Michael V says:

    Really feel like we shouldn’t have any more mergers with MNOs.
    Four MNOs are good. With Three and their aggressive roll out of 5G & 4G improving, it’ll be better competition.
    I’ve been happy with Three for many years. I don’t see any benefit to this proposed merger.

    1. Happy says:

      Apart from their oversubscribed users policy per mast as a result of the bean counters running Three and not the ones with the know all eg the techies.

      And some places don’t even have 4G coverage from Three yet do from the other 3 pardon the pun.

      What should have happened is Three and O2 should have merged like they did in Ireland but that was a missed opportunity due to dubious claims of less competition besides those who say only three networks is bad, the US really only has 3 operators with A T and T, T Mobile and Sprint merged as one and Verizon if it means better and more effective use of infrastructure eg the new Three Vodafone company making the best of Three 5G and Vodafone 4G it’s not a bad thing.

      Besides it was Vodafone looking to buy out Three so that said, it be Vodafone using existing Three infrastructure which seeing as Vodafone has awful 5G coverage is no bad thing if they brought out Three and used their infrastructure.

    2. Joris Bohnson says:

      @happy
      Lol using the US as an example is .
      Have you seen how terrible and expensive it is there.

  7. sam says:

    This is the end of Smarty Unlimited because vodafone don’t like Unlimited for cheaper price!

    Nightmare on elm vodafone street!

    1. Guest says:

      Umm hello Voxi calling, they do unlimited for £35 which is the same as Three so even if Vodafone swallowed up Three, it would just mean former Smarty users would see more coverage and Vodafone would just move the user’s over to Voxi.

      Course you could always leave and go elsewhere….

  8. MilesT says:

    I wonder if competition would be better served with one of the MNO’s becoming a wholesale only network, mutually owned by the MVNO’s it supplies wholesale services to.

    In the UK, Three would be the only candidate which could be easily structured this way, in effect spinning out Three (Retail) as a MVNO, alongside existing and new MVNO on the Three network.

    This kind of structure works in other customer facing areas where there are dominant businesses, e.g. grocery retail (e.g. NISA being a retailer owned coop, in the UK, and similar arrangements in other countries in grocery).

  9. Paul Barrett says:

    This deal was and may still be available.

    SIM only
    Unlimited data
    Unlimited mins
    Unlimited texts

    12m contract
    £16 pcm for 12 month contract.
    With tcb cashback effectively £11.44pcm.

    CHEAPEST DEAL IN THE UK

  10. Paul Barrett says:

    This on the 3 network

  11. Allan says:

    Bad news for consumers, good news for fat cats. If Voda buy out / merger with 3 🙁 no more low priced deals for the less well off. Welcome more mobilephone/broadband poverty 🙁

    I really dont get why Chinese billionaire bossman didnt invest in network infrastructure even 10 years ago. They didnt even upgrade 3G sites to 4G in 2012.. fast forward to 2021 & still the same run down 3G masts & no new 4G/5G masts (except in a few places)

  12. Delorean says:

    If Three can somehow get the Vodafone debt (billions) written off somehow, then it would be far better if Three bought out Vodafone. Three is more consumer orientated whereas Vodafone is more shareholder orientated.

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