A deal to create the UK’s biggest mobile phone operator has been struck by Vodafone and the owner of Three UK.
The firms plan to merge their UK-based operations, giving them around 27 million customers and making it the biggest mobile network in the UK.
The deal it yet to be approved by regulators, which will look at whether it will push up customer prices.
The Vodafone and Three merger will take their combined market share past Virgin Media O2.
Virgin Media O2 has around 24 million customers while EE, which is owned by BT Group, has 20 million mobile users.
Vodafone and Three UK are the country’s third and fourth largest mobile firms. The Competition and Markets Authority (CMA) confirmed that it will examine the combination.
The competition watchdog said: “Both Vodafone and Three are key players in the UK communications market – with millions of consumers and many businesses relying on their services – so it’s right that the CMA reviews the impact this deal could have on competition.”
Customer effects?
Vodafone will own 51% of the new business while Three UK-owner CK Hutchison will control the remaining stake.
Vodafone and Three claimed customers “will enjoy a better network experience with greater coverage and reliability at no extra cost” from day one.
They also said they would invest £11bn in the next generation of telecoms technology – 5G – in the UK over 10 years.
Karen Egan, head on mobile at Enders Analysis, said the companies were “certainly making a strong case for merger approval”.
However, getting there “is going to be a long and tortuous road”, she said and could take up to 18 months.
Ms Egan added that the “CMA’s hawkish approach to mergers of late is not encouraging”, after the competition watchdog blocked UK approval for Microsoft’s proposed $69bn takeover of Call of Duty-owner Activision Blizzard.
In 2016, EU regulators blocked a takeover of O2 by the owner of Three, saying it would reduce customer choice and raise prices. This was after the CMA had also expressed “serious concerns” about that deal.
Job cuts warning
In May, the new chief executive for Vodafone Margherita Della Valle set out her plans for the firm, saying its “performance has not been good enough”.
Part of the plans include cutting 11,000 jobs over three years, which is equal to around a tenth of its workforce.
In addition, Vodafone and Three hinted at extra job cuts within five years of the deal going through due to the consolidation of IT, marketing, sales, distribution and logistics operations.
The Unite union said the deal was “reckless”, and that it would “hike people’s bills and mean job losses for Vodafone and Three workers”.
The merger between the two companies has been long-expected after talks on the deal started in October last year.