Vodafone/Three merger proposal sparks national security concerns

Vodafone will own the majority of the business with 51 per cent, while CK Hutchison will own 49 per cent. The firms first announced they were in talks last October, but the finalised merger agreement will now trigger a lengthy review process by UK regulatory boards.

In 2021, the Competition and Markets Authority approved the proposed merger between Virgin Media and O2. But a previous attempt by Three to buy O2 in 2016 was blocked by the European Commission over concerns that it would reduce competition for UK consumers.

The new deal will help the two firms compete with others in the sector to continue the rollout of their 5G network, which will be able to reach 99 per cent of the population once the deal is confirmed.

Aiming to complete the deal by 2024, Margherita Della Valle, chief executive of Vodafone, said it was a “gamechanger” that would be “great for customers, great for the country and great for competition".

“As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear £11bn network investment plan – driving growth, employment and innovation.”

The groups are expected to have a combined 27 million customers if the deal gets the go ahead, and will offer mobile home broadband to 82 per cent of households by 2030.

But others are not convinced, with Which? arguing that the merger will raise prices and lower service quality for consumers.

“There are currently four mobile network operators in the UK – EE, O2, Three and Vodafone – which smaller mobile providers then piggyback off,” said Rocio Concha, Which?’s director of policy and advocacy.

“Reducing the number of network providers from four to three risks reducing the choices available to consumers, raising prices and lowering the quality of services available.”

The Unite union said that the government must block the “reckless” merger and warned that the deal will give “a company with deep ties to the Chinese state an even more prominent place at the heart of the UK’s telecommunications infrastructure”.

This is in reference to the fact that CK Hutchison is based in Hong Kong, a Chinese territory.

Paolo Pescatore, founder of analyst firm PP Foresight, said there “should not be any security concerns” as the joint venture will be majority owned by Vodafone, which is a British-based company.

“I expect the Hutchison share to reduce over time,” he added. “This should be seen as a gradual exit from the telco market. Having the current Vodafone UK CEO heading up the new operation is a testament to this belief.”