- Vodafone and CK Hutchison sealed a merger in Great Britain, where Vodafone will keep 51% of the combined business.
- The new company will invest 14 billion dollars in the creation of an advanced 5G network.
- In addition, Vodafone announced massive layoffs and a radical restructuring as part of its simplification and competitiveness recovery strategy.
Vodafone and CK Hutchison, the company that owns the Three UK mobile network, sealed a merger of their businesses in Great Britain after having been in talks since the end of 2022.
Both companies confirmed this Wednesday, June 14, in a joint communiqué.
Since the merger is approved by the government authorities in charge of market regulation, Vodafone will keep 51 percent of the combined business, while CK Hutchison will retain a smaller stake.
Current Vodafone UK CEO Ahmed Essam will lead the new company, while Three UK CFO Darren Purkis will serve as CFO of the merged firm.
The new company expects to invest some $14 billion in the UK over the next decade with the aim of “creating one of the most advanced standalone 5G networks in Europe,” the brands said.
The idea is that the merger will finish taking place no earlier than mid-2024.
With the merger, Vodafone and Three will consolidate their positions in the UK mobile telecommunications sector that are dominated by larger rivals. On one side is EE, owned by BT; and, on the other, O2, which belongs to Telefónica and Liberty Global.
You have to remember that BT bought EE in 2016; while Telefónica and Liberty Global merged and launched Virgin Media O2 in 2021.
Although there would be no obstacles to the completion of the agreement, the truth is that the UK Competition and Markets Authority (CMA) has been hindering some mergers.
Suffice it to mention that in May, the CMA blocked the purchase of the video game developer Activision Blizzard (Call of Duty) by Microsoft for 68.9 billion dollars.
Beyond the merger with CK Hutchison, there are big changes at Vodafone
Vodafone’s merger with Three takes place within the framework of an important change process in the company.
In May, Vodafone announced massive layoffs involving 11,000 employees as part of a radical restructuring strategy for the British phone operator.
It was confirmed by the new CEO, Margherita Della Valle. In that scenario, Vodafone shares tumbled more than 4 percent.
Beyond the separations, what worried investors the most is the forecast drop in revenues and in Vodafone’s so-called “free cash flow” for the remainder of 2023.
The layoffs announced by Vodafone involve 11,000 jobs in the next three years, starting from now, on a total staff of more than 100 thousand workers.
This is the largest redundancy plan in the history of the British company.
Della Valle said that “the priority is customers, simplicity and growth” and that they will remove “all complexities” from the organization with the idea of ”regaining competitiveness.”
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