Vodafone confirms discussions with rival Three UK over tie-up

Vodafone said it’s in discussions with CK Hutchison Holdings about a combination with rival Three UK, the latest attempt to consolidate the UK telecom market.

The deal would involve a combination of the two companies’ UK businesses, with Vodafone holding 51 per cent and CK Hutchison owning 49 per cent of the new unit, Vodafone said in a statement on Monday. Shares in Vodafone gained as much as 3.6 per cent in trading in London on Monday following the statement.

A combination of Vodafone and Three UK has been speculated for years, and Vodafone has teamed up with CK Hutchison in other markets like Australia. Vodafone initially expressed interest late last year in acquiring its smaller rival, Bloomberg previously reported.

Vodafone chief executive officer Nick Read is currently trying to consolidate in key markets while facing pressure from shareholders including Europe’s largest activist fund, Cevian Capital AB.

Mr Read has said he is pursuing deals in the UK, Spain, Italy and Portugal. However, rival Orange SA clinched the biggest likely deal in Spain, and Mr Read turned down an offer for Vodafone Italy from Iliad SA.

“By combining our businesses, Vodafone UK and Three UK will gain the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and small businesses, Vodafone said in the statement.

“The merged business would challenge the two already consolidated players for all UK customers and bring benefits through competitively priced access to a third reliable, high quality, and secure 5G network throughout the UK.

The ownership stakes in the new company would be determined by different leverage contributions, and there won’t be a cash consideration, Vodafone’s statement added. — Bloomberg