Key takeaways
- Vodafone and CK Hutchison have said they will merge their UK mobile phone businesses.
- Vodafone would hold a 51% stake in the new company “MergeCo”.
- The deal could face regulatory challenges as the UK would only have three mobile providers.
Vodafone Group (VOD) and CK Hutchison, owner of UK mobile phone network Three UK, have announced they will merge their UK telecommunications businesses, months after entering negotiations on a deal.
The companies said the deal would make Vodafone the 51% majority shareholder in what is called “MergeCo”. They indicated that the transaction did not contain any cash consideration. It is expected to close by the end of next year.
Vodafone UK CEO Kingdom, Ahmed Essam, will become the CEO of MergeCo, and Three UK's chief financial officer, Darren Purkis, will be the chief financial officer of the new company.
Vodafone reported last October that it was in talks with its smaller rival, and Three UK's Purkis noted in March that the talks were “gradual and positive”.
CK Huchison Group Co-Chief Executive Canning Fok explained that the combination gives the two companies “the scale to deliver a world-class 5G network in the UK, transforming mobile services for our customers and opening up new opportunities for businesses”.
The proposal might come up against regulatory hurdles, since the union of Vodafone and Three UK would leave the country with just three mobile operators.
American Depositary Receipts (ADR) of Vodafone Group Plc rose 1.7% on Wednesday morning after the news broke, after trading at a 27-year low on Tuesday.
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Source: investopedia.com
