London, United Kingdom – Mobile phone giant Vodafone has agreed to merge British operations with Three UK, owned by Hong Kong-based CK Hutchison, to accelerate rollout of faster 5G connectivity, the pair announced Wednesday.
Expansion of 5G across the UK has been hampered by Britain’s ban on Chinese giant Huawei, a major supplier of equipment for mobile telephone networks.
Vodafone and CK Hutchison said in a joint statement that a new combined group is seen having a value of £16.5 billion ($21 billion) following the deal’s completion due by next year.
“The merger is great for customers, great for the country and great for competition,” said Vodafone chief executive Margherita Della Valle, who recently cut 11,000 jobs at the group.
“It’s transformative as it will create a best-in-class — indeed best in Europe — 5G network, offering customers a superior experience,” she added.
The merger will lead to network investment of £11 billion over ten years, the statement said.
Canning Fok, group co-managing director of CK Hutchison, said the tie-up “will have the scale needed to deliver a best-in-class 5G network for the UK, transforming mobile services” for customers.
“This will unlock significant value for CK Hutchison and its shareholders, realize material synergies, reduce net financial indebtedness and further strengthen its financial profile,” he added.
The transaction will see Vodafone take 51 percent of the combined group and CK Hutchison the rest.
“The deal is obviously subject to approvals from shareholders and regulators and Vodafone’s statement gives a clear indication that it is the latter they are more concerned about,” noted Dan Ridsdale, analyst at Edison Group.
The merger, if approved by regulators, will pit the new group against the country’s two largest mobile operators BT EE and Virgin Media O2.
“The release reads like an overt pitch to convince a broader set of interest groups… leading with the benefits for customers, country and competition, before looking at deal synergies,” added Ridsdale.
The statement said the merger “will deliver up to £5 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,” it added.
In 2020, London banned Chinese telecoms giant Huawei from involvement in the roll-out of Britain’s superfast 5G broadband network, after US concerns about spying.
“Countries like China and Russia are willing to manipulate and exploit or steal our intellectual property, use technology for authoritarian ends, or withdraw crucial resources like energy,” British Prime Minister Rishi Sunak last week told a news conference following a White House summit with US President Joe Biden.