The Vodafone Group plc (LON: VOD) share price rose 4.28% after unveiling plans to merge its UK operations with CK Hutchison in a deal valued at £15 billion ($19 billion). The combined entity will be the largest UK mobile network operator boasting over 27 million customers.
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The deal will likely face intense scrutiny from regulators based on antitrust concerns despite the two companies reassuring customers that there would be no price hikes. The combined entity would also offer better network coverage to clients within 12 months of the deal closing.
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The two firms have also promised to invest at least £11 billion in Britain over 10 years to create what they described as “one of Europe's most advanced standalone 5G networks”. The two firms noted that it would be challenging to generate a return on their 5G investments if they did not merge.
Vodafone is the UK’s third-largest mobile network operator, with CK Hutchison being the fourth-ranked mobile operator. The two companies promised to provide flexible, contract-free offers with no annual price increases, plus social tariffs.
The two companies expect to save £700 million per year by combining their respective networks by the fifth year after the deal is completed. The two firms expect to complete the transactions by 2024, subject to regulatory and shareholder approval.
Vodafone will own 51% of the combined entity, while CK Hutchison will own the remaining 49%. There will also be a clause in the agreement that allows Vodafone to acquire CK Hutchison’s 49% stake in future if they so desire.
Vodafone’s share price rally lifted it from yesterday's 25-year low of 71p.
Vodafone's CEO, Margherita Della Valle, said: “As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear 11 billion pound network investment plan – driving growth, employment and innovation,”
CK Hutchison Co-Managing Director, Canning Fok, said: “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 is not investment advice.
Vodafone share price.
The Vodafone share price rose 4.28% to trade at 75.670p from Tuesday’s closing price of 72.435p.
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