Vodafone and Three agree merger to create UK's biggest mobile phone network

The deal is expected to face intense scrutiny from regulators. Bloomberg

Mobile phone companies Vodafone and Three owner CK Hutchison Group have announced an agreement to merge their UK networks in a deal to create a European telecoms giant and Britain's largest operator.

The details announced on Wednesday come after the two companies publicly revealed they were in talks in October.

Vodafone's shares rose 2.5 per cent after the deal was made public.

“Together, we will have the scale needed to deliver a best-in-class 5G network for the UK, transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the UK,” CK Hutchison's co-managing director Canning Fok said.

Vodafone will own 51 per cent of the combined group while Hutchison will own 49 per cent. It will be led by current Vodafone UK boss Ahmed Essam, the companies said.

Three's UK finance chief Darren Purkis will take the same role in the new group.

The combined operator will have about 27 million customers, overtaking BT's EE and VM O2, jointly owned by Telefonica and Liberty Global.

Three UK and Vodafone UK were the fourth and third-biggest operators in the UK before the merger deal.

The deal will face scrutiny from regulators who have previously opposed deals that reduce the number of networks in major markets from four to three.

“For Vodafone, this transaction is a game changer in our home market,” said Vodafone chief executive Margherita Della Valle. “This is a vote of confidence in the UK and its ambitions to be a centre for future technology.”

Customers would not face extra costs, and there would be flexible, contract-free offers with no annual price increases, plus social tariffs, the companies said.

The two groups said they would invest £11 billion ($14 billion) in Britain over 10 years to create what they described as “one of Europe's most advanced stand-alone 5G networks”.

Vodafone and Three have also agreed to take on £6 billion in debt. Vodafone will take £4.3 billion of that and Three will account for £1.7 billion, which will be refinanced, the companies said.