VOD Vodafone Group PLC

By Anthony O. Goriainoff and Joe Hoppe

Vodafone Group said Wednesday that it has agreed to merge its U.K. operations with CK Hutchison Holdings' Three as first flagged late last year, valuing the new business at a net present value of more than 7 billion pounds ($8.83 billion).

The London-listed telecommunications group said the merger will create the U.K.'s largest mobile operator with 27 million customers, the separate companies having previously trailed BT Group's previously market-leading EE, and O2, owned by Telefonica and Liberty Global.

The merger--which has been in discussion since October--is expected to result in substantial efficiencies, amounting to more than GBP700 million of annual cost and capex synergies within five years of the deal closing, Vodafone said.

Vodafone will own 51% of the combined business with Hong Kong-listed CK Hutchinson owning the other 49%. There is no cash consideration.

The transaction is expected to close before the end of 2024, subject to regulatory approvals, which could be a tall order given likely concerns over diminished competition and consumer choice, Interactive Investor's head of investment Victoria Scholar said.

"In 2016, the U.K. and European regulators blocked a takeover of O2 by Three, citing concerns about higher prices. However, Vodafone's new CEO Margherita Della Valle insists this deal will be great for competition," Scholar said in a market comment.

Vodafone UK's current Chief Executive Officer Ahmed Essam will become the combined business's CEO and Three UK's Chief Financial Officer Darren Purkis will become its CFO.

The combined business plans to invest GBP11 billion in the country over 10 years, intending to create one of Europe's most advanced standalone 5G networks.

"For Vodafone, this transaction is a game changer in our home market. This is a vote of confidence in the U.K. and its ambitions to be a centre for future technology," Vodafone Chief Executive Margherita Della Valle said.

Vodafone Shares at 1132 GMT were up 1.97 pence, or 2.7%, at 74.40 pence.

Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com and Joe Hoppe at joseph.hoppe@wsj.com

(END) Dow Jones Newswires

June 14, 2023 07:49 ET (11:49 GMT)

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