Citing the need for greater scale and cost efficiency, Vodafone Group Plc and CK Hutchison Group Telecom Holdings announced plans to merge their UK telecommunication businesses. Vodafone will own 51% of the combined business (“MergeCo”) and CKHGT 49%.
The combined business commits to invest £11 billion in the UK over ten years with the aim of creating one of Europe’s most advanced standalone 5G networks, while promising shareholders significant cost savings through operational synergies. These are expected to amount to more than £700 million of annual cost and capex synergies by the fifth full year post-completion, with an implied NPV of over £7 billion.
Current Vodafone UK CEO Ahmed Essam will become MergeCo CEO, and current Three UK CFO Darren Purkis will take the role of MergeCo CFO.
“The merger is great for customers, great for the country and great for competition. It’s transformative as it will create a best-in-class – indeed best in Europe – 5G network, offering customers a superior experience. As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear £11 billion network investment plan – driving growth, employment and innovation. For Vodafone, this transaction is a game changer in our home market. This is a vote of confidence in the UK and its ambitions to be a centre for future technology,” stated Margherita Della Valle, Vodafone Group Chief Executive.
“Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital. This has long been a challenge for Three UK’s ability to invest and compete. Together, we will have the scale needed to deliver a best-in-class 5G network for the UK, transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the UK. This will unlock significant value for CK Hutchison and its shareholders, realise material synergies, reduce net financial indebtedness and further strengthen its financial profile,” states Canning Fok, Group Co-Managing Director of CK Hutchison.
