Britain has approved Vodafone’s $19 billion merger with Hutchison’s Three UK, creating the country’s largest mobile operator. The decision hinges on the companies’ commitment to a substantial £11 billion ($14 billion) investment in 5G infrastructure, which the UK government and regulators believe will drive long-term competition, despite initial concerns about reduced market competition and potential price increases.
The Competition and Markets Authority (CMA) gave the green light to the merger on Thursday, after addressing concerns that reducing the number of major telecom operators from four to three could raise prices for consumers. The merging companies pledged to make significant investments and adopt measures to maintain competitive dynamics.
“We believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed—but only if Vodafone and Three agree to implement our proposed measures,” the CMA said in a statement.
The merger will lead to the construction of a state-of-the-art 5G network capable of serving 50 million customers, including subscribers from Virgin Media O2, Vodafone’s network-sharing partner. This investment supports the UK government’s focus on enhancing infrastructure to fuel economic growth and improve connectivity.
In addition to the 5G infrastructure commitments, Vodafone and Three UK have agreed to several measures to maintain competition, including selling spectrum to Virgin Media O2, capping certain tariffs, and offering favorable contract terms for mobile virtual network operators (MVNOs).
Analysts see this merger as a landmark shift in telecom policy, as it marks the first major four-to-three merger in a European market approved without requiring structural remedies, such as creating a new competitor. Karen Egan of Enders Analysis commented, “Three high-quality networks instead of four inferior ones will serve consumers and businesses better, breaking the cycle of low returns and low investment.”
Vodafone CEO Margherita Della Valle described the merger as a transformative move that would “unlock capital, unleash competition and investment, and boost economic growth by improving connectivity speeds.” She emphasized that the advanced 5G network would be pivotal in advancing the UK’s science and technology sectors.
However, the integration of Vodafone and Three UK may prove challenging, with competitors like EE and Virgin Media O2 positioning themselves to strengthen their market share during this transition. The companies have yet to decide on whether to retain both brands, as well as their value-focused brands, Voxi and Smarty.
Under the terms of the deal, Vodafone will hold a 51% stake in the newly merged entity, with the option to acquire the remaining 49% after three years, contingent upon specific conditions.
Following the announcement, Vodafone’s stock rose by 1%, reaching 71 pence in morning trading.
The CMA’s approval underscores a growing recognition across Europe of the critical need for massive investment in digital infrastructure. With this merger, Vodafone and Three UK aim to set a new standard for connectivity, improving services for businesses and consumers in the UK.
