M&A News: Vodafone Seals £15B Three UK Merger to Become European 5G Leader

Shares in mobile phone giant Vodafone (VOD) were flat today despite sealing a £15 billion mega-merger with Three UK. It creates the U.K.’s biggest mobile network operator.

Boost U.K. Growth

The new group, called VodafoneThree, has pledged to plough in £11 billion of investment over the next 10 years to help boost 5G infrastructure and coverage. It will spend £1.3 billion of that sum in the first 12 months.

Vodafone said the deal will create a “new force in U.K. mobile” with around 27 million customers ahead of rivals EE and O2 and be one of Europe’s most advanced 5G networks.

This, it said would boost daily life, hopes of U.K. economic growth, improve public services and narrow the nation’s digital divide.

Margherita Della Valle, Vodafone group chief executive, said: “The merger will transform the country’s digital infrastructure and propel the U.K. to the forefront of European connectivity. It will bring customers greater coverage and superior network quality.”

Security Concerns

The deal was first announced two years ago but has been held up by concerns that it could lead to reduced competition in the market and higher customer prices.

There were also national security concerns given that Three is owned by Hong-Kong based group CK Hutchison.

The deal passed a national security review, and The Competition and Markets Authority also gave the green light last December. However, it came with conditions attached such as investment and customer tariff guarantees.

The combined business will be 51% owned by Vodafone and 49% by CK Hutchison. The chief executive will be Max Taylor, who currently leads Vodafone UK. Three UK’s Darren Purkis will be its Chief Financial Officer.

Is VOD a Good Stock to Buy Now?

On TipRanks, VOD has a Moderate Buy consensus based on 1 Buy and 1 Hold ratings. Its consensus target price is $13.04 implying an 26.11% upside.