UK-based Vodafone Group has issued a statement responding to recent press speculation related to Vodafone UK and Three UK, confirming that it is indeed in discussions with Hong Kong’s CK Hutchison Holdings Limited, owner of Three UK, relating to ‘a possible combination’ of the pair’s British mobile units. According to Vodafone Group, the envisaged transaction would involve both companies combining their UK businesses, with Vodafone owning 51% of the enlarged entity, while CK Hutchison would have a 49% stake. It was noted that the relative ownership would be achieved through a differential leverage contribution at closing, and no cash consideration would be paid.
Seemingly setting out a pre-emptive argument for why a tie-up of Vodafone UK and Three UK should be allowed by regulatory authorities – if a final deal were to be reached – it noted: ‘The conditions to ensure thriving competition in the market need to be nurtured, otherwise the UK is at risk of losing the opportunity to be a 5G leader. As Ofcom has identified, some operators in the UK – Vodafone UK and Three UK – lack the necessary scale to earn their cost of capital … By combining our businesses, Vodafone UK and Three UK 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 small businesses.’
Nonetheless, Vodafone Group stressed that ‘there can be no certainty that any transaction between the two companies will ultimately be agreed’, while adding that any further announcements regarding the matter will be made ‘when appropriate’.