Hong Kong conglomerate CK Hutchison's senior leadership held discussions with British government officials last month to seek political support for the proposed merger of its Three UK mobile network with Vodafone UK. The deal is set to receive intense regulatory scrutiny from the Competition and Markets Authority (CMA), which will investigate the potential impact of reducing the number of networks from four to three. The report has been shared by Reuters.
In October, Vodafone announced it was in talks with Three UK to combine their networks with an ownership split of 51% Vodafone and 49% CK Hutchison. The companies will argue that they need to join forces to afford the roll-out of standalone 5G networks, which the UK government has set an ambition to deliver to all populated areas by 2030.
The deal is likely to be announced amid rising bills for millions of customers across all four networks, with regulators seeking to maintain a competitive market. However, the risks of anti-competitive deals should not be understated, according to CMA's boss Sarah Cardell.
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In February, Cardell stated in a speech titled "UK merger control in 2023" that a minimum of four operators in major markets has long been a tenet for regulators. CK Hutchison attempted to acquire Telefonica's UK unit O2 seven years ago, but the deal was opposed by Britain's telecoms regulator and blocked by the European Commission.
The proposed merger of Vodafone and Three UK would leapfrog BT's EE and Virgin Media O2 to become the market leader with 27 million customer connections. Both companies have invested heavily in 4G and 5G in recent years but have stated that their financial returns are insufficient to continue doing so.
Hutchison's co-managing director, Canning Fok, met officials in Prime Minister Rishi Sunak's government, including Sunak's son-in-law, with one source describing the meeting as positive. Fok also met Vodafone's interim CEO, Margherita Della Valle, to push the deal over the line.
The companies may make commitments on network investment and customer pricing when they announce the deal. However, regulatory approval from the CMA is required before any such agreement can proceed.
The UK government stated on Tuesday its "openness to market consolidation", but emphasised that all decisions on consolidation were for the CMA to make. The government also confirmed its ambition to deliver standalone 5G to all populated areas of the country by 2030, driven by a "pro-investment framework".
CK Hutchison's billionaire owner, Li Ka-shing, has played an influential role in British business for over a decade. His company owns a number of businesses in the country, including ports, energy, and mobile networks.
