Vodafone and CK Hutchison, parent company of UK mobile network Three, have announced a USD 19 billion merger. Under the deal, Vodafone will own a majority 51% stake, while Hong Kong-based Hutchison will own 49% of the newly combined group.

The merger of Vodafone's UK division and Three UK will consolidate the country's mobile operator sector and reduce it to three major players. With around 27 million customers, the merged operator will become the largest mobile group in the UK. This consolidation trend has been significant in the telecoms sector in recent years. Previously, Vodafone and Three lagged behind their larger competitors, EE (owned by BT) and Virgin Media O2 (owned by Telefonica and Liberty Global through a joint venture).

Both Vodafone and Three have committed to investing £11 billion in the UK over the next decade, with the aim of creating one of the most advanced standalone 5G networks in Europe, in line with targets set by the UK government.

The proposed merger is expected to be subject to a strict scrutiny by competition regulators with regard to its potential impact on the market. However, it is worth noting that the UK telecoms regulator Ofcom has recently changed its stance on industry consolidation and has expressed a greater willingness to consider such mergers. Previously, Ofcom was of the view that reducing the number of networks to three in the country could have a negative impact on consumers. In 2016, for example, the Competition and Markets Authority (CMA) and the European Commission intervened and prevented Three's attempted acquisition of O2, citing concerns about potential price increases for end customers.

"Legislation and regulation have been a significant barrier to mergers and acquisitions in recent years, with several major deals blocked or significantly delayed due to competition and consumer protection concerns."

-Jan Kudlák, TMT Deloitte Leader

Vodafone shares rose 3.6% after the deal was announced, but it must be noted that earlier in the week its shares fell to a 25-year low of 71p.