Extensive consolidation project in British mobile

le projet de Vodafone et de CK Hutchinson doit encore passer un examen de l'Ofcom, le régulateur des télécoms en Grande-Bretagne.

Posted Oct 3, 2022, 6:45 PM

Considered for years by the world of British telecoms, the marriage between telecom operators Vodafone UK and Three UK has never been so close to being celebrated. In a press release, the number three in access to mobile networks across the Channel indicated on Monday, October 3 that it was in discussion for a merger with the number four in this same market. An operation that would give birth to number one on the mobile across the Channel.

In this scheme financed entirely by share exchange, the parent company Vodafone would own 51% of the shares of the joint venture against 49% for CK Hutchinson, the owner of Three UK. On the London Stock Exchange, Vodafone rose 2.57% on Monday.

Activist Funds

But today’s announcements weren’t a complete surprise to investors. Under pressure from activist funds, notably Cevian, Vodafone chief executive Nick Read was pushed to become a player in market consolidation in European countries where it would make sense while disengaging from peripheral countries.

After Vodafone rejected an offer from Iliad and Xavier Niel in Italy, the hypothesis of an operation in the United Kingdom held the rope. Especially since Vodafone’s market valuation continued to fall (-17% in six months).

Ofcom’s U-turn

In post-Brexit Britain, the climate is more favorable than it has long been for this kind of merger. Certainly, the project of Vodafone and CK Hutchinson must still pass a review by Ofcom, the telecoms regulator in Great Britain. But this institution which plays the role of the French Arcep made it known last February that it was now more open to the possibility of a market with three operators in the United Kingdom.

“Our position on a potential merger would be informed by the specific circumstances of that particular merger, rather than the number of competitors,” the regulator wrote, paving the way for a possible transaction if it could notably have positive spinoffs in terms of capacity. investment in new technologies. A new opinion which contrasts with the past doctrine of Ofcom. In 2016, the body opposed the merger between 02, another mobile operator, and Three UK.

Antitrust more lenient

On the side of the antitrust authority, the British CMA has also recently been more lenient than in the past in the telecoms sector. Also opposed to the 02/Three deal, it then authorized in 2021 the giant merger between 02 (Telefonica) and Virgin Media (Liberty Global) on the British market.

In this context, the British telecoms market is being watched closely. Xavier Niel thus acquired 2.5% of the capital of Vodafone in September. Owner of Altice, Patrick Drahi is an 18% shareholder in BT, the former incumbent operator.

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