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(Alliance News) - Vodafone Group PLC and CK Hutchison Holdings Ltd on Wednesday announced a tie-up of their UK telecommunications arms, following talks which began last year.
Shares in Vodafone were up 3.6% at 75.03 pence each in London late Wednesday morning, among the best FTSE 100 performers. CK Hutchison closed down 0.5% at HKD48.85 in Hong Kong.
The companies will combine their UK businesses, with Vodafone owning 51% and CK Hutchison owning 49% of the combined business.
CK Hutchison is a Hong Kong-based telecommunications, ports, infrastructure and retailing conglomerate. It owns the Three UK business. Vodafone is a Newbury, England-based telecommunications operator.
Vodafone and CK Hutchison have call and put options, respectively, which if exercised, would result in Vodafone acquiring CK Hutchison's 49% shareholding.
Neither company will pay a cash consideration for the merger, instead, they will take on debt. Vodafone will take on GBP4.3 billion and Three UK GBP1.7 billion.
The deal is expected to close before the end of 2024.
Vodafone said: "By having a best-in-class 5G network in place sooner, the merger will deliver up to GBP5 billion per year in economic benefit by 2030, create jobs and support digital transformation of the UK's businesses. Every school and hospital in the UK will have access to standalone 5G by 2030."
The companies explained that the transaction is expected to result in "substantial efficiencies". These are expected to amount to more than GBP700 million of annual cost and capital expenditure synergies by the fifth full year post-completion.
Vodafone Chief Executive Margherita Della Valle described the merger of Vodafone UK and Three UK as being "great for customers, great for the country and great for competition".
"It's transformative as it will create a best-in-class - indeed best in Europe - 5G network, offering customers a superior experience. As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator - with a clear GBP11 billion network investment plan - driving growth, employment and innovation. For Vodafone, this transaction is a game changer in our home market."
Della Valle is new to the CEO role at Vodafone. In April, Vodafone confirmed the appointment of Margherita Della Valle as CEO, taking over from Chair Jean-Francois van Boxmeer's temporary responsibilities as interim group CEO.
Discussions surrounding the potential merger have made headlines since October, when Vodafone confirmed possible talks.
Then, on Wednesday last week, Reuters reported that an announcement was expected as soon as Friday last week, or early this week. The news agency said the GBP15 billion combination is set to create the country's biggest mobile operator, with 27 million customers.
The duo will have BT Group PLC and Virgin Media-O2 for rivals. The latter is a joint-venture owned by Liberty Global PLC and Telefonica SA.
By Sophie Rose, Alliance News reporter
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