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Vodafone, Three UK merger talks 'no surprise', analysts say

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Talks of a merger between Vodafone and Three UK are no surprise given both need greater scale to compete with BT and Virgin Media O2, Kester Mann, director of consumer and connectivity at CCS Insight says.

Talks between the UK operators were confirmed by a Financial Times report earlier this week and this should be “no surprise” given that both firms could benefit from the deal.

“Three has talked up consolidation for years; Vodafone is under shareholder pressure to strike deals,” Mann says.

Earlier this year, Robert Finnegan, chief executive of Three UK labelled the UK market as “dysfunctional”, urging structural changes despite strong customer growth in its financial results.

In February, Nick Read, CEO at Vodafone echoed those beliefs and said that the company was actively pursuing mergers with rivals in European markets.

“A few years ago, a tie-up between Vodafone and Three would have felt like a unnatural pairing, but in recent times, Vodafone has taken on more of a challenger role, notably evidenced by its launch of speed-tiered unlimited data tariffs,” Mann adds.

“Three’s traditional focus is on market disruption and providing value for money, so their cultures may not now be too far apart.”

Any deal would be boosted by the relationship that already exists between the companies given CK Hutchinson, Three UK’s owner and Vodafone have already merged operations in Australia.

Although Mann insists that regulation will prove a significant hurdle.

“This is because it would instantly create a new market leader based on mobile customers and own a vast trove of 5G spectrum.

“Some concessions would almost certainly be necessary.”

Three recently announced it would be switching off its 3G networks in 2024.

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