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Vodafone and CK Hutchison set to unveil £15bn UK mobile tie-up

Vodafone and CK Hutchison are close to agreeing on a £15bn merger of their UK telecoms businesses that would create the country’s biggest mobile operator with 28mn customers. The deal values the equity of the combined group at £9bn with £6bn of debt, making its enterprise value £15bn. The tie-up - with a planned ownership spit of 51% Vodafone and 49% Hutchison - is likely to face intense regulator scrutiny.

The talks to combine Vodafone UK and CK Hutchison’s Three UK have been going on for nearly a year. Vodafone has been under pressure from its investors to streamline its operations by selling off underperforming nits and pursuing deals in highly competitive markets like Spain, Italy, and the UK. The transaction has also been delayed due to other issues, including the resignation of Vodafone’s CEO Nick Read at the end of last year. Both parties are now waiting for confirmation of a permanent replacement to complete the sale. Vodafone confirmed the appointment of Della Valle, the former chief financial officer, last week.

In a joint statement in October last year, the two companies are looking to speed up the UK’s 5G transformation through the merger. They claim that by combining their businesses, Three UK and Vodafone UK will gain the necessary scale to be able to accelerate the UK’s rollout of full 5G and increase internet availability to remote areas and small companies. They also said that the combined company would compete with the two established market leaders and bring benefits to UK clients through competitively priced access to a third reliable, high quality, and secure 5G network nationwide.

However, the Competition and Markets Authority (CMA) has been suspicious of mergers that could result in greater market power after the majority of UK mobile providers raised rates by approximately 14% earlier this year. In 2016, a similar deal between Three UK and O2 was rejected. Both groups are also preparing to face political opposition on national security concerns. Vodafone’s share price closed 0.92% lower down to $11.85 per share on the day of the announcement.

Written by: Quynh Chi (Camila) Le

Sources: Financial Times, YahooFinance, CK Hutchison

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