VodafoneThree, formed last summer, is to buy CK Hutchison’s 49% stake, gaining full ownership two years sooner than expected
Vodafone is to assume full control of the merged entity VodafoneThree formed in a £16.5 billion deal last summer after a protactacted approvals process. The merger of the UK’s third and fourth biggest mobile operators created the UK’s largest and reduced the number of national mobile networks from four to three.
Now Vodafone is to acquire CK Hutchison Group Telecom Holding’s 49% stake as the Hong Kong-based conglomerate continues is strategy of shedding major assets to reward shareholders. Vodafone’s takeover is subject to approvals including the UK National Security and Investment Act. It expects to complete the deal in the second half of this year.
Faster than expected
Vodafone already owns the other 51% and said the £4.3 billion buyout of its partner implies an enterprise value for VodafoneThree of £13.85 billion including debt. It will pay cash and cancel Three’s shares.
The only surprise about the move is its speed: under the terms of the merger, Vodafone had the option of acquiring CK Hutchison’s stake after three years if the merged group reached an enterprise value of £16.5 billion.
Clearly the earlier buyout is acceptable to both parties. As Ernest Doku, telecoms expert at Uswitch.com, notes, it is “bringing [VodafoneThree’s] 27 million customers under one roof much sooner than expected”.
More control, great confidence
Vodafone said in a statement that it is now more confident about delivering its plans to create one of Europe’s leading telecoms networks, including a realisation of £700 million in annual cost and capital expenditure synergies by financial year 2030.
Vodafone Group’s CEO Margherita Della Valle said, ‘I’m delighted that we will now have full ownership of VodafoneThree as we roll out one of Europe’s most advanced 5G networks, provide the UK’s best customer experience and drive long-term value for our shareholders.”
Max Taylor will continue his role as CEO of VodafoneThree, supported by the existing VodafoneThree leadership team.
The second largest mobile operator in the UK is EE, owned by BT Group, and the third is Virgin Media O2, jointly owned by Spain’s Telefónica and the US’ Liberty Global.
Doku adds, “While a single owner could speed up the £11 billion investment into a better 5G network, it also likely means the end of the road for Three as the independent ‘challenger’ that has traditionally pushed for lower prices and faster connectivity.
“With Vodafone now solely in the driving seat, it must continue to prove that having one less competitor won’t simply lead to higher bills for consumers, or a market where there is less pressure to compete or innovate.
VodafoneThree has the lower cost sub-brands SMARTY and VOXI.
