Vodafone Three deal to create UK's largest mobile firm

A deal to create the UK's biggest mobile phone operator has been struck by Vodafone and the owner of Three UK.

The firms plan to merge their UK-based operations, giving them around 27 million customers and making it the biggest mobile network in the UK.

The deal is yet to be approved by regulators, which will look at whether it will push up customer prices.

The Vodafone and Three merger will take their combined market share past Virgin Media O2's.

Virgin Media O2 has around 24 million mobile customers while EE, which is owned by BT Group, has 20 million users.

Vodafone and Three UK are the country's third and fourth largest mobile firms. The Competition and Markets Authority (CMA) confirmed that it will examine the merger.

The competition watchdog said: "Both Vodafone and Three are key players in the UK communications market - with millions of consumers and many businesses relying on their services - so it's right that the CMA reviews the impact this deal could have on competition."

Vodafone's UK boss, Ahmed Essam, who will retain his role in the merged firm, said: "As we go into the coming weeks, we are going to bring the case to the CMA. We believe that this case stands on very strong grounds.

"We're very confident on our case."

Customers

Vodafone will own 51% of the new business while Three UK-owner CK Hutchison will control the remaining stake.

Vodafone and Three claimed customers "will enjoy a better network experience with greater coverage and reliability at no extra cost" from day one.

They also said they would invest £11bn in the next generation of telecoms technology - 5G - in the UK over 10 years.

Consumer group Which? said reducing the number of major UK telecoms firms from four to three "risks reducing the choices available to consumers, raising prices and lowering the quality of services available".

But Karen Egan, head of mobile at research firm Enders Analysis, said similar deals in other countries had not led to price hikes.

"Consumers benefit from effectively funding just three nationwide networks rather than four," she said.

She added that the companies were "making a strong case" for approval of the deal, although getting there would be "a long and tortuous road" and could take up to 18 months.

Ms Egan added that the "CMA's hawkish approach to mergers of late is not encouraging", after the competition watchdog blocked UK approval for Microsoft's proposed $69bn takeover of Call of Duty-owner Activision Blizzard.

In 2016, EU regulators blocked a takeover of O2 by the owner of Three, saying it would reduce customer choice and raise prices.

Vodafone and CK Hutchison confirmed UK merger talks last October.

Margherita Della Valle, chief executive and chief financial officer of Vodafone, admitted in May that its "performance has not been good enough" and set out plans to cut 11,000 jobs.

On Wednesday, Vodafone and Three hinted at additional job cuts within five years if the merger is approved. They said that they expected consolidation of IT, marketing, sales, distribution and logistics operations.

The Unite union said that the deal was "reckless" and would "hike people's bills and mean job losses for Vodafone and Three workers".