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Vodafone in talks to combine UK arm with CK Hutchison’s Three
Latest effort to consolidate British mobile telecoms comes as activist investor exerts pressure
https://www.ft.com/content/c4f9aac3-94f0-4d4b-ae9b-5b9e97fbc2d1
The UK telecommunications group Vodafone is reportedly in talks to combine its UK operations with domestic rival Three UK, the mobile operator owned by Hong Kong infrastructure conglomerate CK Hutchison, people with direct knowledge of the matter said.
The deal, if concluded, would herald the latest attempt to consolidate the British mobile market as Vodafone faces pressure from Europe’s largest activist investor, Cevian Capital, to simplify its business, pursue deals in national markets and improve returns.
A combination of Vodafone UK and Three UK would bring together the third and fourth largest mobile network operators in Britain, though any deal to reduce the number of leading brands from four to three would trigger scrutiny from competition authorities.
Industry executives are hopeful that regulators’ increased awareness of the need to invest in network infrastructure has made them more amenable to mergers than they were in 2016, when the European Commission blocked a proposed merger between O2 and Three.
European telecoms groups have struggled over the past decade, with strong competition and consumer-friendly regulation weighing on earnings. Although Vodafone’s share price has rallied by 3 per cent since the start of the year, the company has shed 44 per cent of its value over the past five years.
Three, meanwhile, has struggled to gain scale over the past few years, despite ambitions to double its size. Though the company has enjoyed an increase in net new customers since mid-2020, it has not managed to translate those gains into significant revenue growth. Last week, the company reported flat quarter-on-quarter revenues of £582mn.
Over the past year, Vodafone chief executive Nick Read has been vocal about his desire to pursue deals in countries he believes suffer from an excess of market competition, including Spain, Italy and the UK.
The exact structure being discussed between Vodafone and CK Hutchison could not be learnt, though Read has said on many occasions that he is focused on pursuing combinations more than outright purchases, given his ambitions to reduce the group’s debt.
Earlier this year, analysts at Enders Analysis noted that Vodafone’s “lack of funding capacity” suggested that in the UK it could look to “form a joint venture with the potential to contribute additional debt or receive cash equalisation payments to assist with leverage reduction”.
Analysts had previously speculated that Vodafone could seek to buy Three but noted that it would need to meet CK Hutchison’s hefty price expectations for the privilege of consolidating the UK mobile market.
Funny how this story breaks on BT Results day.
Strange, it's normally an O2/Virgin media story on BT results day
Sounds expensive and desperate. Just make what you have more efficient, lower those costs and steal market share. Let you weakened competition flounder.
will this lower debt?
It could lower costs if done correctly (big IF) hence lower debt.
It's notable how VOD is holding up given the wider market that is despite my fears of an ultimate 90p destination.
I'm thinking of adding a batch at a time even though cod's law would dictate that it'll trigger a collapse, since there is no way the market will allow me to profit in any way.
"I'm thinking of adding a batch at a time even though cod's law would dictate that it'll trigger a collapse"
Don't you mean shoal, instead of "batch". since you mentioned "cod's law" lol.
It's sod's law that we all get at least one typo per post.
"Strange, it's normally an O2/Virgin media story on BT results day"
Indeed
Robina, if you think it's going lower, why would you add now, might be worth waiting
Robleo - I'd guess you're hunch is probably more right than wrong.
I used cod's rather than sod's since it's cleaner and cod's eye comes to mind too.
Robina, it's nothing more than a hunch of course, just thinking of how low it went by xmas last year, and theres a lot going on right now, are next weeks going to be good or bad of just a thought, obviously i have no idea only a guess that's all, and would much prefer it to go up instead, good luck whatever
mehmehmeh. "will this lower debt" Off course not, but it might reduce costs? Was that a serious question?
Whatever Robina does, the opposite happens, sod's law, Just give up might be better. So, let's all predict the vod sp will plummet next week, bound to go up then? Sounds like gamblers sod's law addictive logic to me? Very dangerous? Bookmakers make much more % profit from cash in bets than from the original bets due to sod's law thinking.
Not so sure about that dan, he has all the high dividend shares i have and a lot lot more, so must be doing ok think he maybe very modust perhaps