Electrical Equipment / Components & Telecoms

Telecom operator Vodafone has reached an agreement with the owner of Three to merge its telecommunications network in the UK, thus creating the largest mobile operator in the UK.

Telecom operator Vodafone has reached an agreement with the owners of Three to merge its telecommunications network in the UK, thus creating the largest mobile operator in the UK. However, this transaction may face scrutiny from UK competition regulatory authorities, as reported by Import and Export Data Watch.

The Guardian reported that these two companies are the third and fourth largest operators in the UK. If the merger is completed, the new company will have over 27 million users, surpassing EE under British Telecom and Virgin Media O2 jointly controlled by Telef ó nica in Spain and Liberty Global in the United States.

The UK Communications Authority (Ofcom) stated last year that it is now more open to the integration of the industry. But the agency had previously stated that when a country only has three mobile networks left, it may harm consumers' interests.

In 2016, the UK Competition and Market Authority (CMA) and the European Commission blocked Three's acquisition of O2 on the grounds that the acquisition could lead to price increases, as reported by import and export data observation.

The UK government may also conduct a review of this transaction in accordance with the requirements of the National Security and Investment Act 2021. According to the bill, if transactions related to important national assets are deemed to harm national security, ministers have the right to block the transactions. Vodafone UK has several government contracts.

The UK trade union Unite also supports blocking merger transactions, stating that a key national asset is jointly held by foreign investors, which is a concern and may lead to layoffs and price increases after the merger. It is reported that Three UK is owned by CK Hutchison, headquartered in Hong Kong.

According to the import and export data observation report, last month, Vodafone announced that it planned to cut 11000 jobs in the next three years. In addition, the company has also been heavily criticized for rising prices above inflation levels.

Gail Cattermel, executive director of Unite operations, said, "This transaction will make a company with a deep relationship with the Chinese government more prominent in the core position of the British telecommunications infrastructure. Most importantly, this transaction will increase consumers' bills, resulting in the unemployment of Vodafone and Three workers. The government must intervene to prevent this reckless merger."

The two companies are currently attempting to leave a good impression on regulatory authorities and facilitate the success of the transaction through a proposal of no price increase for 5 years.

However, they also face obstacles from competitors, such as potentially requiring the merged new company to abandon some of its 5G mobile spectrum and allow Sky, TalkTalk, and other brands without their own infrastructure to share their network.

In a stock market announcement released on Wednesday, Margarita Della Valle, CEO of Vodafone Group, described the merger of Vodafone UK and Three UK as "beneficial to customers, the country and competition".

According to the import and export data observation report, Vodafone will hold 51% of the shares of the merged company, and Changjiang Hutchison will hold 49% of the shares. According to the plan, Vodafone promises to invest 11 billion pounds in the UK within 10 years, and has the right to acquire the shares held by Cheung Kong Hutchison three years after the completion of the transaction (expected to be completed by the end of 2024). (Translated from: European Times)