Vodafone and CK Hutchinson have sealed the deal on a long-awaited Vodafone UK and Three UK merger that will create the country's largest telecom operator with over 27 million subscribers.
The deal is expected to receive scrutiny from regulators who have consistently opposed the consolidation of network operators in the U.K, where in 2016 the European Commission denied CK Hutchison's proposal to merge with Telefonica's O2.
Vodafone and Three are the U.K.'s third and fourth largest operators, respectively, and a merger would overtake BT's EE and Virgin Media O2, which is owned by Telefonica and Liberty Global.
British trade union Unite called the merger “reckless” and raised worries that the deal would lead to higher phone bills and more job cuts. Vodafone already slashed 11,000 jobs in May as part of its new CEO’s transformation plans for the company.
Unite’s executive head of operations Gail Cartmail in a statement said the merger would also give CK Hutchinson, “a company with deep ties to the Chinese state, an even more prominent place at the heart of the UK’s telecommunications infrastructure.”
“The government must step in and stop this reckless merger and Unite is building a cross-party coalition to demand they do so,” Cartmail added.
To go through, the transaction would need approval under the UK National Security and Investment Act, which gives regulators the authority to stamp it down.
Vodafone and CK Hutchinson said they will present their plans to Britain's Competition and Markets Authority (CMA). Notably, they have said the combined business will invest just under $14 billion over the next 10 years to roll out standalone 5G networks “in full support of UK Government targets.”
The companies are also committing the combined business to offer fixed wireless access, or mobile home broadband, to 82% of households by 2030.
“By having a best-in-class 5G network in place sooner, the merger will deliver up to £5 billion per year in economic benefit by 2030, create jobs and support digital transformation of the UK's businesses,” Vodafone said in a statement. “Every school and hospital in the UK will have access to standalone 5G by 2030.”
The CMA 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," as reported by the BBC.
However, the operators remain confident.
“We believe that this case stands on very strong grounds. We're very confident on our case," said Vodafone's chief executive Ahmed Essam.
The groups claim the deal will result in cost savings of nearly $900 million within five years of completion through merging their systems and operations, although they declined to estimate how many jobs might be affected.
Vodafone will own 51% of the combined business, and CK Hutchinson will take the rest, although as part of the deal Vodafone will have an option to buy out the Hong Kong-based company after three years if the company reaches a value of at least $21 billion.