A significant shakeup of the UK mobile sector could be on the cards, after it was reported that two UK operators are close to announcing a merger.

A report in Bloomberg last week reported that Vodafone Group Plc and Three UK are putting the final touches on a deal to create the UK’s largest mobile operator.

The report, citing people with knowledge of the matter, even suggested that the two operators may announce details of the tie-up as soon as this month.

Long time coming?

It was back in May 2022, when it was first reported by the Financial Times that Vodafone was in talks to merge its UK operations with Three UK.

Both Vodafone and Three declined to comment at the time, but it was noted that if the merger talk resulted in a tie up, it would likely to face significant regulatory scrutiny – not least because of the fact that Three UK is owned by China-based CK Hutchison Holdings.

Spectrum holdings and market competition would also be considered by regulators.

It came after Vodafone’s then chief executive Nick Read said in February 2022 the operator was pursuing mergers with rivals in multiple European markets, spurred on by more favourable signals from regulators who have realised the value of network investment during the Covid-19 pandemic.

Vodafone was (at one stage) the world’s biggest mobile operator (in terms of revenue), before it sold off its hugely valuable 45 percent stake in Verizon Wireless in the United States.

But it has struggled in its traditional strongholds of Europe, amid intense competition, difficult regulatory environments and falling legacy revenue.

The UK is especially competitive, with four big name operators, EE, O2, Vodafone and Three UK going head to head in the market.

In October 2022 Vodafone officially confirmed it was in talks with Three UK over a possible merger.

Possible merger

Now Bloomberg reported that Vodafone and Three UK’s owner, CK Hutchison Holdings Ltd, are working through the last details of the structure of the deal, and ways to address potential antitrust issues surrounding it.

The proposed merger of Vodafone and Three in the UK could be announced as soon as this month, according to the report.

A merger between the two operators would be worth an estimated £14.5 billion ($17.5bn).

Under the proposed plans, Vodafone would own 51 percent of the company, with Three holding the rest.

Bloomberg reported that CK Hutchison could exit the JV in the longer term.

UK consolidation

There has been some notable consolidation in the UK market over the past decade.

EE it should be remembered, was itself a merger between T-Mobile and France Telecom’s acquired and then spun out again ‘Orange’ mobile operation.

EE was acquired by former UK telecoms incumbent BT Group in January 2016, uniting the UK’s biggest fixed line and mobile providers.

Three UK meanwhile had also sought to merge with rival operator O2 back in 2016, with a £10.25 billion deal for O2.

That deal however was blocked by regulators in May 2016, after both the UK Competitions and Markets Authority (CMA) and Ofcom, as well as the EC opposed the transaction.

That tie up was blocked after none of the remedies offered satisfied “serious” concerns about the impact on the mobile sector at the time.

But four years later in 2020, regulators overturned that decision, after O2 merged with Virgin Media in 2021, in a move that combined Virgin Media’s broadband, TV, mobile and landline services with the mobile operations of O2.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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