Vodafone and Three Agree Deal to Create UK's Biggest Mobile Firm

What Does the Vodafone-Three Merger Actually Mean For Your Business?

Mobile telecommunication providers, Vodafone and Three, have agreed to merge their UK operations to create the country’s biggest mobile network. The new combined group will have a joint customer base of 27 million mobile customers. From expanded 5G coverage to improved network experiences and more, this merger is a huge announcement with a lot to unpack. So, that’s what we’re going to do! We’re going to explore what this new partnership could mean for the telecommunications industry and, most importantly, what it could mean for your business. Ready? Let’s go.

 

The Background: Who Are Vodafone and Three?

Vodafone is one of the world’s largest telecommunications companies that was founded in the UK in 1984. Before the merger with Three, Vodafone currently have a UK customer base of 19.7 million, making them the third largest mobile provider in the UK, after O2 and EE. Vodafone offers a range of solutions across mobile, IoT, data services, broadband, cloud and has built a robust network infrastructure, including investments in 5G technology. The company has expanded steadily over the years, through strategic partnerships and acquisitions to enhance its global reach and service portfolio, earning a strong presence in several key markets across the technology sector.

Three are another prominent telecommunications provider that launched in 2003 as the UK’s first 3G only network. Nowadays, Three identifies themselves as a connectivity company that connects ‘people to people, people to things and things to things’. They currently have a customer base of 9.5 million. With a focus on data provision for customers, Three has been voted the Best Network for Data at the Mobile Choice Consumer Awards, as well as Best Network for Roaming by uSwitch and the Best High Street Retailer at the Mobile Industry Awards.  Prior to the merger, Three were the fourth largest mobile provider in the UK, behind O2, EE and Vodafone.

 

The Merger: What is Happening?

The two businesses plan to join forces in this £15 billion merger with Vodafone owning 51% of the combined business. Kester Mann, Director of Consumer and Connectivity at CCS Insight described this merger as “the biggest shake-up in the UK mobile market for over a decade.”  Although there are concerns regarding potential job losses and increased bills, both companies have positioned the deal as being in the public interest, due to the investment in the UK and expansion of the UK’s 5G network, which they claim will bring substantial benefits to both their customers and the UK as a whole. At this stage, regulators still have to approve the deal in order for the merger to be guaranteed. If all goes to plan and the deal is approved, the merger will be completed before the end of 2024.

 

What is this Merger Promising to Achieve For the UK?

Vodafone Group Chief Executive, Margherita Della Valle, described the merger of Vodafone UK and Three UK as being “great for customers, great for the country and great for competition.” As the statement suggests, the merger aims to bring about a lot of change for the industry, the UK and, of course, the merged customer base.

Both companies have promised to invest £11 billion into the UK over the next 10 years in order to expand and enhance its 5G networks to create, what they described as “one of Europe’s most advanced standalone 5G networks”. This expansion is in support of the UK Government’s targets for 5G. Vodafone have outlined that this ‘best-in-class’ 5G network will deliver up to £5 billion per year in economic benefit by 2030, creating jobs and supporting digital transformation of UK businesses. This network will serve 99% of the UK population by 2034 and key organisations are set to benefit from this merger with Vodafone citing, “every school and hospital in the UK will have access to standalone 5G by 2030”. So far, it’s looking like a positive partnership that could serve the country, the public and key facilities and services, if successful.

 

How will the Vodafone-Three Merger Affect the Market?

In terms of competition, Vodafone and Three have outlined that the merger will “level the competitive playing field through creating a third mobile operator with scale, competing across all technologies and driving investment by all players”. 5G is one of the main topics within this merger with Vodafone stating that combining their business with Three will “gain the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and businesses.”

However, the deal being approved could depend on Vodafone and Threes’s ability to convince the Competition and Markets Authority that the market will be healthier and more competitive, as a result of this merger. There are fears that the movement from four mobile network operators in the UK to three operators, could cause price rises and a restriction of choice for consumers. These fears could cause a barrier to the deal being passed, so the two companies would need to demonstrate that the benefits for the consumer, brought about by the acceleration of 5G, outweigh the competitive risks of reducing the number of network providers within the market.

In terms of size, the Vodafone and Three merger would make them the UK’s largest mobile network operator, leapfrogging the current biggest providers, O2 and EE. O2 joined forces with Virgin Media in their merger in June 2021, which involved all Virgin Mobile customers being transferred over to O2’s mobile plans. This merger has created a customer base for Virgin Media O2 of around 24 million for mobile solutions, making them the largest UK network. EE, which is owned by BT Group was the second largest with 20 million mobile users. The merger of Vodafone and Three will see them overtake both EE and Virgin Media O2 with a combined customer base of around 27 million.

 

What Does the Merger Mean For Customers?

Vodafone and Three have claimed that “from day one, millions of customers of Vodafone UK and Three UK will enjoy a better network experience with greater coverage and reliability at no extra cost”. Furthermore, they have pledged that their 5G standalone network will deliver up to a six-fold increase in average data speeds by 2034. These are big promises, so the question is – what real benefits will this merger provide for customers and, more specifically, your business?

Group Co-Managing director of CK Hutchinson (Three’s parent company), Canning Fok has stated:

“Together [Vodafone and Three], will have the scale needed to deliver a 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.”

A bold, but not completely unsubstantiated claim. If this merger is successful, it looks promising for consumers and businesses alike, as well as those who are not purchasing mobile solutions from Vodafone thanks to the expansion of 5G. However, nothing can be guaranteed at this stage. As we said earlier, this merger has not been passed as yet, so despite the claims both companies have made, they are just that for now – claims.

However, let’s assume that the merger is approved and they successfully achieve the aims they have promised. The expansion of 5G will bring about improved speeds and connectivity, even in more rural areas of the UK. This will enable further advances in technology and accelerate digital transformation within businesses. It has also been argued that the market becoming more competitive because of this merger could, in theory, lead to better prices and deals for mobile customers – however, this can’t be guaranteed.

The transaction is expected to close before the end of 2024, dependent on regulatory and shareholder approvals. How big is the chance of this deal going ahead? It is quite likely, but not guaranteed. There is still a decent chance that regulators will stop the deal from passing, as it has happened previously when Three attempted to take over O2 in 2016. The reason for the deal folding was the risk that the deal would lead to higher prices – a similar risk that could threaten the chances of the Vodafone-Three merger. All that’s left to do now is to watch and wait to see how the deal fairs with the relevant regulators and shareholders, but you can rely on us to keep you up to date!

 

Need Advice About Your Business Mobile Contract?

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