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Vodafone and Three UK Reportedly Open Merger Talks

Thursday, May 12th, 2022 (2:46 pm) - Score 10,296
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Unconfirmed reports claim that mobile operators Vodafone and Three UK (CK Hutchison Holdings) have opened early stage talks with a view to reaching an agreement over a possible merger / joint venture of their two businesses in the UK, which would reduce the number of primary network operators from four to three.

The report, which is said by the FT (paywall) to have emanated from sources with direct knowledge of the matter, wouldn’t come as much of a surprise, if true, because the pair have often appeared to flirt with the idea of a merger – most recently at the start of this year (here).

After the previous mergers between BT and EE, as well as O2 and Virgin Media, it becomes somewhat easier to understand why Vodafone and Three UK might be seeking a bit more security together. Other markets around the world have also recently seen a reduction in primary mobile operators from four to three (e.g. Ireland).

In the past, Ofcom has tended to object to big mobile-only mergers, which is partly because they wanted to protect consumer and wholesale (MVNO) competition in the market. But a 2020 ruling by the European Court of Justice (here) made it harder to adopt that position, although the regulator is no longer beholden to such rulings post-Brexit but is still believed to have softened their stance (we won’t know for sure until they’re tested).

Nevertheless, the benefits of such a merger aren’t quite as clear 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 (they’ve also got some fibre of their own).

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). The markets’ many virtual operators (MVNO) may also have some big concerns.

Kester Mann, Director, Consumer and Connectivity at CCS Insight, said:

“Confirmation of talks between Vodafone and Three in the UK would come as no surprise. Three has talked up consolidation for years; Vodafone is under shareholder pressure to strike deals. Both need greater scale to compete with BT and Virgin Media O2 in the competitive UK market.

A few years ago, a tie-up between Vodafone and Three would have felt like a unnatural pairing. But in recent times, Vodafone has taken on more of a challenger role, notably evidenced by its launch of speed-tiered unlimited data tariffs. Three’s traditional focus is on market disruption and providing value for money, so their cultures may not now be too far apart. Additionally, the two companies have joined forces before, having merged operations in Australia a few years ago.

Regulation would prove a significant hurdle to any deal. This is because it would instantly create a new market leader based on mobile customers and own a vast trove of 5G spectrum. Some concessions would almost certainly be necessary.”

One other issue, which is much harder to skirt around, is the fact that Three UK is more of a low-cost brand, while Vodafone tends to position itself as a premium service. This would make it difficult to turn one business into a single merged company, so some degree of compromise may be required.

Lest we forget that there may also be other complications, given that Vodafone has a network sharing agreement with O2, while Three UK has something similar with EE. At the time of writing, neither Vodafone nor Three UK have commented on the latest reports.

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62 Responses
  1. Martin says:

    Basically the same as the proposed merger of O2 and Three a few years ago. This was blocked but then subsequently allowed by the regulators (although O2 had moved on by this stage) so the precedent has been set to allow the deal.

    1. Martin says:

      …the same issues were there with each partner having a stake in CTIL and MBNL so soem unpicking would be needed.

  2. Peter says:

    This will be bad for competition in the mobile space.
    Would be better if Vodafone and Three merged with a fixed line company like Vodafone/CityFibre or even Three/TalkTalk

    1. Michael says:

      Vodafone has an agreement with city fibre already.
      It’s network infrastructure based.

  3. simon says:

    “This would make it difficult to turn one business into a single merged company, so some degree of compromise may be required.”

    Well when it comes to Voxi/Smarty they are smack on each other – so that might lessen that problem?

  4. Sam Perry says:

    I dont see the issue. EE have been allowed with BT and O2 with Virgin.. It would certainly speed up 5G rollout.

    1. Steve says:

      Theres a huge issue here, this is 2 mobile spectrum licence holders talking about condensing to one, this really reduces competition. The comparisons with O2/Virgin and BT/EE dont work as they are fixed/mobile convergence, not just 2 mobile operators coming together.

    2. Scott says:

      Steve is spot on with his comments.
      The idea stems from OfCom wanting faster roll out of technology but i can’t help but feel that by the time a merger took place, strategies were evolved and delivery/roll out progressed it would be too late to gain any real benefits.

      BT/EE have already hit 50% coverage for 5G after 3 years so I do wonder if any new company should be bound by providing full UK coverage (like EE have to for the Emergency Network), otherwise they’ll just focus on cities/urban sprawl leveraging their large holding of radio spectrum.

    3. Shaun says:

      @Steve
      In that case why was the merger between Orange and T Mobile ( rebranded to EE) allowed to go ahead without much fuss? Like Vodafone and three those were also standalone mobile networks.

  5. Alex A says:

    Seems unlikely, the previous mergers (BT/EE, O2/VM) haven’t reduced competition.

    1. tech3475 says:

      One problem with that comparison is that BT and VM only have/had MVNOs and a quick search shows that VM is shutting down their PAYG service and I can see their contracts going as well in the future in favour of O2.

      Three/Vodafone run physical networks which are also used by other MVNOs.

      I also recall hearing after the T-Mobile/Orange merger that when masts were shut down, people in certain locations began having signal issues they previously didn’t have.

  6. Smythe says:

    This is good news and should be allowed to go through.

    1. Disappointed customer says:

      have you ever tried a speed test on vodafone? They’re now one of the slowest networks. Their 5G deployment is a joke. They will ruin three and the speed that three has on 5G. Honestly odafone’s 5G I can’t tell the difference from their 4G. 10mbit 5G with masts along motorways instead of near the homes people live in.

      I hate vodafone, and I don’t like the sound of this deal one bit. I think vodafone will take three down with them.

    2. Hamish says:

      Please no, three managed 0.2mbps with full signal bars, their “tech” support is non existent, ill versed in English and they couldn’t tell the truth if their lives depended on it.
      With Vodafone, speeds are decent locally and not had any issues. Had one question, indian call centre couldn’t answer it so referred it onto the UK, who called me back and explained everything.

    3. Daniel says:

      Three is appalling, 4mbts. The only good part is their hold music was Africa by toto so when you phoned to complain it wasn’t so bad. I switched to Vodafone and now get 100mbts on 4g. My concern is that the merge will contest the Vodafone network. As a large shareholder, they invited all of us to discuss the merger.

  7. Matt says:

    So would the Three branding go completely?

    1. The Wee Bear says:

      Nah Threedafone sounds fine. :o)

    2. André says:

      Vodaree?

    3. The Wee Bear says:

      Just as acceptable I think André.

    4. Michael says:

      Hey Matt. No it seems like a joint venture.
      Vodafone has been struggling for years financially. If anything I see Vodafone merging into Three.

  8. Lucian says:

    Personally I think it’s not a good idea, it would harm competition and thus not benefit the users.

  9. anonymous says:

    Bad move. Three and O2 competitive vs EE and Vodafone who aren’t (and if they have brief spells only because of competition and key is to look historically not just current). It’s already consolidated from historic situation and the big companies just look to eat up the competition so they can dictate everything.

    That’s my view but I guess someone will get the usual backhander and it will be passed through as in great for the public.

    1. James Brown says:

      On balance, I think this is good if it transfers some focus from price to infrastructure investment. Maybe the merger could be agreed on the proviso that the combined network meets a certain bandwidth/latency criteria and 5g coverage within a given time frame.

  10. Dave4000 says:

    All I can say is nobody is in the same league as Three when it comes to the cost of unlimited data SIMs. The typical price of a Three unlimited data SIM is only £20/month, however it’s pretty common to see cashback deals that result in an effective price of £10 or less per month for a 12 month contract. In my own area(a small town) Three delivered 5G while other providers haven’t(Vodafone) so I can get up to 500Mb/s download speeds with any unlimited Three data SIM.

    Seems to me Three are the most aggressive on low price unlimited deals by some way, and that’s not Vodafone’s style.

    1. Brett says:

      I truly hope Three isn’t going anywhere as I will never go onto Vodafone.
      Vodafone being advertised as premium is a joke, it just costs more for less.

      I use my phone for mostly Data and Vodafones offerings are pathetic in comparison.
      £32/month for actual unlimited data (Unlimited Max, the other 2 are speed restricted).
      the lower cost unlimited offerings are speed restricted which works out to a max of 5.1GB/mnth for £23 or 25GB/Mnth for £27 if you was to download 24/7.

      When I moved house we had to wait over a month for any ISP to connect us (proper mess).
      In that time I had to Tether my PC to my phone for the internet and used over 135GB!

      Three only charge me £22 sim only for Truly unlimited data (5g comes as standard).

    2. Fastlane256 says:

      Vodafone is pretty affordable. I got unlimited data no speed cap for £20 just by speaking to customer services.

  11. fuelelelelel says:

    ugh please no

  12. YUK says:

    Shit Network Meet Shit Customer Service

  13. bert says:

    The best network meets the worst network.

  14. ELL says:

    If the merger did go though, I suspect that Vodafone would be seen as the premium brand and Three as the non premium brand, it would also reduce operating costs as you wouldn’t need two separate organisation structures.

    It might even mean that Three users would get 5G where Vodafone provide 5G and vice versa which for connectivity reasons is one of the main reasons why it should go ahead.

    After all Ireland just has three operators as does many other countries in the EU which works fine so I really fail to see the argument that it’s bad for competition.

  15. Mobile Broadband says:

    In a strange way I hope Vodafone and Three do merge together. That would help Improve the 4G network in Edinburgh and the other big places the Signal is ok. But I live in a Village in Fife the 4G Signal is poor.

  16. Jack says:

    The positives being the combined spectrum the two providers have, and the fact that Three 5G is in a lot of areas Vodafone don’t currently have 5G live.

  17. Aled says:

    Think of it another way.

    They both have to spend hundreds of millions rolling out 4g+ and 5g across 90% of the country area mass. Theoretically, if you’re facing significant business reviews and investment cases, if you could reduce the cost by 40% while speeding up your coverage at the same time, it does bring mutual benefits to both companies.

    Personally, if it wasn’t for the new 5g rollout, I’d probably say this deal was dead in the water. The two cultures are not natural. Vodafone pricing has adopted a confusing and messy American style pricing policy. It kinda feels like their trying to outdo virgin media – just look at the mess of their website shop (trying to upsell TV and media packages).

    Three are who they are. If they work, their damned cheap and brilliant. If they don’t, avoid.

  18. Jazzy says:

    Voda is a network I have never been on and they never appealed to me. I always thought they were quite expensive. My husband is on smarty and he loves in. Signal is great for him and he’s happy with his £6 a month deal. More than enough Data plus unlimited calls and texts

    There a lot of the MVNO’s offering cracking deals that undercut the big boys and people are shying away from contracts so they will have to adapt. I buy direct from Apple now and use a GiffGaff sim in my phone which saves me £15 a month or £360 over a 2 year contract period. With sim locking now outlawed and people looking for better deals and iPhones etc lasting longer, they need to think about their profit margins

    1. Wendy Byrde says:

      The trick with buying a Vodafone plan is to either buy via a cash back site (eg Quidco) or use a third party retailer such as carphonewarehouse.com which offers exclusive (cheaper) Vodafone plans. You then get the best of both worlds.

  19. Michael says:

    Vodafone has been struggling for years. I see this would probably end in a Vodafone merged into Three.

    This subject has been brought up once before, after the failed Vodafone & Liberty Global deal fell thru…
    Now Liberty Global & O2 are together!

    This would be a huge benefit for both operators for coverage.

    I’m with Three & plan on staying put. It’ll be interesting to see how this plays out.
    But I do have Vodafone as my 2nd mobile device.

    Interesting times.

  20. ELL says:

    One question that will or should be asked is simply would the merger be conditional upon the new company giving up some of their spectrum to other operators?

    Eg repurposing the spectrum to be reallocated to the likes of VMO2, EE etc?

  21. Three Retail Employee says:

    I work in Three Retail, I do not like the sound of this proposed merger one bit. I have a very good friend who used to be a Area Manager for Vodafone, from what he told me & what I saw, working for Vodafone sounded like an absolute mess, horrendous systems, processes, policies &
    internal chaos which meant a worse experience for the customer. Three are different, but we are on the rise across all metrics, Vodafone are on the decline. I don’t feel the cultures would sit well together, it doesn’t seem like a natural marriage. I’m also worried for inevitable residencies if such a merger were to happen across the business. I cannot see a scenario where Three would want to relinquish its market leading position for 5G spectrum holdings alongside other huge investments it has been making in recent history & future proofing itself.

    1. James Brown says:

      Yes, I’m sure this is correct, I suspect the big company mentality at Vodafone prevents anything useful getting done / people hiding behind processes. However, Three has such bad coverage that I can’t use my company VPN when travelling on the train, I can’t do business abroad, it really is a shame they don’t focus on quality instead driving prices lower.

  22. ad47uk says:

    I hope this don’t happen, not only will it be less competition, but I am with Smarty which is owned by Three and I vowed never to go with Vodafone again. Useless overpriced, no customer service of a company it is.

    I am happy with smarty, I pay very little, but then I use very little. Maybe it is time to start doing some research on another provider.

    1. BTee says:

      There’s a good few months to a couple of years before anything happens, and that’s if they decide to go ahead. Might-as-well stay where you are for now.

  23. Tom says:

    This is not good for competition. The combined entity will have 230 MHz of combined n78 5G spectrum, that will completely blow EE and O2 out of the water, that’s triple what they have.

    And it will eliminate the only truly budget carrier in the UK. Three’s 4G network is very congested, but the value is incredible, especially before they got rid of global roaming. You can get unlimited data on Three for as low as £14. No way will that still exist after a merger with Vodafone.

    1. Daniel says:

      It might still as they would have a larger customer volume and if they can use the Vodafone neteork it would make a larger network with more coverage. They would probably combine sites to make it more cost effective but I think it would give required investment.

  24. John says:

    Bad news for Smarty ?

    1. Daniel says:

      What about voxi?

  25. Carl O says:

    I don’t think it’s a problem, the spectrum can be portioned off in tiny bits to O2/EE which will bring in millions to Vo3.

    O2 would most likely be the main buyer as their 4G is pants, and their 5G really needs some work.

    Even if a quarter was sold off, they’d still have a shed load of spectrum, and it’s essentially already paid so consumers won’t be hurt that much.

    Main concern would be the outcome for the staff, mostly retail units as the cost to have 2 types on the high street is an expensive ordeal, but would save a few million, and then office space condensed, but moving to a work from home/hub model can resolve some of that.

  26. spurple says:

    Please don’t let this happen.

    Either one of those telcos is large enough to buy a Fixed Broadband provider if they want to become more competitive with VMO2 and EEBT.

  27. Mike says:

    After Orange/T-Mobile merged, Three scrapped their unlimited plans, this can’t happen again.

    1. ELL says:

      Not true, even post EE I used to get a unlimited THREE data plan on both pay monthly and pay as you go so they didn’t scrap them in fact they kept them and other companies followed them in providing unlimited plans.

    2. Mike says:

      @EEL

      Referring to the One Plan.

  28. Clivey B says:

    I’ve had Vodafone in the past, couldn’t wait to get rid, if they are merging with 3, then looks like I’ll be leaving 3.

  29. Dave says:

    Waste of time, will be blocked immediately

  30. BTee says:

    I’ve been on contract with Voda for nearly two years, since returning from abroad. Previous to that I was with Orange and Voda. Never had an issue with Voda, nor the customer service, but maybe I have been lucky. Only ever been one place where I have had no signal at all (in a caravan park in Devon), and I have a PAYG EE sim in my phone as a backup so that wasn’t an issue. However, fully appreciate everyone has a different experience.

    Tried a Three 4G internet router a year or so ago, along with a contract unlimited SIM. The network here is dreadful. So slow and oversubscribed. However, again, customer service, whilst a bit slow, did their job and sorted out refunds very quickly.

  31. El Guapo says:

    No.

    Please.

    God.

    No.

    I like three.

  32. Ben Smith says:

    Both three and Vodafone have a massive undertaking to build their 5G network. Its a huge investment and combining efforts in this endeavour make sense. To deliver a true 5G network requires deployment at a much more granular level using small cells. That means a lot of fibre to street assets such as street light poles and liaison with municipal authorities. Its a huge undertaking and the new company would also need to invest in fibre in a big way. They would do well to buy an existing player in this space.
    Its fairly obvious that most people don’t understand that true 5G cannot be delivered at the macro level using existing mono poles. Here in london, the networks have been doing just that and it’s ridiculous. You can have full strength reception on your mobile device and you will get better performance in terms of speed and latency from the 4G service delivered from the same mono pole than from 5G (because 5G doesn’t scale well at the frequency they are deploying at and quickly gets congested).
    They need to deploy small cells in the mm wave band with much fewer users connected to each cell over shorter distance.
    This is all something which is seldom explained in press articles.

    Anyway, in the meantime, a merger between the two should at least provide much better 4G coverage to both sets of customers, as both three and Vodafone are really patchy compared to the other two.

  33. GG says:

    Vodafone … premium? LOL.

  34. Christopher Jones says:

    Not surprised after the way 3 Network stabbed me (a customer of 7 years) in the back after I was pushed into a Cameron Inspired cash crisis in 2014. IF THEY TREAT THEIR REGULAR CUSTOMERS THE WAY THEY TREATED ME, THEY DESERVE TO GO OUT OF BUSINESS!! :((

  35. plunet says:

    The mast sharing agreement that Voda has with O2, and EE with 3 is I suggest a significant physical asset barrier to this deal, the amount of work it would take to unpick the mast sharing would be significant. And that’s before you consider the reduction in competition that the loss of a significant network will entail.

  36. Yatta! says:

    When Three’s Italian sister network merged with another of their big four ‘Wind’, they were forced to sell spectrum to enable a new network to enter the market, it was purchased by the French firm Iliad who’re best known for their ‘Free’ branded services in their native France.

    Iliad is now Italy’s best value network.

    I wouldn’t be opposed to Three and Vodafone’s merger if a similar arrangement is required here.

  37. MilesT says:

    Well, Voda-3 merger would give 3 customers a 2g network to fall back to, and maybe some better coverage.

    That said, it would be helpful if Ofcom required the remaining 2g networks to support universal fallback roaming at a government set interchange rate to create near universal coverage, treating calls, text, and maybe gprs-speed data (for find my device type needs at least) as a “essential” service.

  38. Bob says:

    Nobody has commented on the Voda AU and 3 AU merger? – 3 disappeared out of Australia, and the merger was plagued with issues 🙂

  39. Rod says:

    Remember when T-Mobile merged with Orange and became EE ? prices went up. Not good news for those who are struggling.. however excellent news for shareholders, fat cats, higher up employees.

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