Vodafone and Three have agreed to merge their UK operations and create the country’s largest mobile network (MergeCo), with a combined 27 million customers, leapfrogging both O2 and EE for scale.
MergeCo promises to invest £11bn in the UK over ten years to expand and enhance its 5G networks, in full support of UK Government targets. This network is set to address 99% of the UK population by 2034.
The combined business will offer fixed wireless access to 82% of households by 2030.
Both parties expect efficiencies amount to more than £700m of annual cost and capex synergies by the fifth full year post-completion.
The deal sees Vodafone take a majority stake with 51% equity, and CK Hutchison, Three’s parent company, taking the remaining 49%. Options are included allowing Vodafone to acquire CK Hutchison’s stake.
MergeCo will have a six-person board, comprising three directors appointed by Vodafone and three directors appointed by CK Hutchison.
Current Vodafone UK CEO Ahmed Essam (pictured) will become MergeCo CEO, and current Three UK CFO Darren Purkis will take the role of MergeCo CFO.
Margherita Della Valle, Vodafone Group Chief Executive, said: “The UK will benefit from the creation of a third scaled operator with a clear £11bn network investment plan driving growth, employment and innovation.”
Canning Fok, Group Co-Managing Director of CK Hutchison, added: “Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital. This has long been a challenge for Three UK’s ability to invest and compete.
“Together, we will have the scale needed to deliver a 5G network for the UK, transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the UK.”
The Transaction is expected to close before the end of 2024, subject to regulatory and shareholder approvals.