The long-rumoured tie-up is close to agreement according to sources such as the Financial Times and Reuters.
Vodafone would own 51% of the combined entity while CK Hutchison will take a 49% stake in the company.
“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,” a Vodafone statement said.
However, any potential deal will still be subject to approval from the Competition and Markets Authority (CMA).
Dan Ridsdale, director of TMT at Edison Group believes the regulatory approval process is likely to take some time and approval will be required at two levels – from the CMA – who will look at the competitive and economic benefits and from the government under the National Security and Investment Act.
“For the CMA, the equation is likely to come down to how much they take into account the consumer benefits from the promised acceleration to the roll out of 5G, gained through economies of scale versus the competitive risks from concentrating market power,” he says.
The UK has previously prevented the consolidation of the market from four to three players in the past after blocking a proposed deal between Three UK and O2.
The investment required to deliver on 5G has changed the economics for operators and according to Ridsdale, there is an argument to be made that the consumer will suffer unless the economics are improved.
“This will be offset by concerns that recent price hikes implemented by the mobile operators will become easier to implement in a less competitive environment, although the operators are likely to argue that a more efficient market structure will reduce cost/investment pressure.”
Additionally, Ridsdale believes that from a national security standpoint, the government will need to weigh up whether the risk is greater from having the nation’s largest mobile operator 49% owned by a Hong Kong-based company, than by having a smaller operator wholly owned by CK Hutchison as it is now.
