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MERGER OF VODAFONE UK & THREE UK
TO CREATE ONE OF EUROPE’S LEADING 5G NETWORKS
(London and Hong Kong, 14 June 2023) Vodafone Group Plc (“Vodafone”) and CK Hutchison Group Telecom Holdings Limited (“CKHGT”), a wholly owned subsidiary of CK Hutchison Holdings Limited (“CK Hutchison”), have entered into binding agreements in relation to a combination of their UK telecommunication businesses, respectively Vodafone UK (“Vodafone UK”) and Three UK (“Three UK”) (the “Transaction”). Vodafone will own 51% of the combined business (“MergeCo”) and CKHGT 49%.
Margherita Della Valle, Vodafone Group Chief Executive, described the merger of Vodafone UK and Three UK as being “great for customers, great for the country and great for competition.”
Great for Customers
- From day one, millions of customers of Vodafone UK and Three UK will enjoy a better network experience with greater coverage and reliability at no extra cost, including through certain flexible, contract-free offers with no annual price increases, and social tariffs.
- MergeCo will reach more than 99% of the UK population with our 5G standalone network, delivering to customers up to a six-fold increase in average data speeds by 2034.
Great for Country
- The combined business will invest £11 billion in the UK over ten years to create one of Europe’s most advanced standalone 5G networks, in full support of UK Government targets.
- 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. Every school and hospital in the UK will have access to standalone 5G by 2030.
Great for Competition
- The merger will create a third operator with scale, levelling the competitive playing field, increasing competition to the UK’s two leading converged operators and will also provide more choice in wholesale partners for the UK’s already competitive MVNOs.
- The combined business will offer fixed wireless access (mobile home broadband) to 82% of households by 2030, complementing MergeCo’s access to the UK’s biggest full fibre footprint.
Value-creating Transaction
- No cash consideration to be paid, with the Vodafone UK and Three UK businesses contributed with differential debt amounts at completion to achieve MergeCo ownership of 51:49 between Vodafone and CKHGT.
- Comprehensive joint governance framework in place between Vodafone and CKHGT, with Vodafone fully consolidating MergeCo. Vodafone and CKHGT having call and put options, respectively, which if exercised, would result in Vodafone acquiring CKHGT’s 49% shareholding.
- MergeCo will have a six-person board, comprising three directors appointed by Vodafone and three directors appointed by CK Hutchison.
- Employees of both businesses will be afforded equal opportunities for relevant positions in the combined business.
- The Transaction is expected to result in substantial efficiencies. These are expected to amount to more than £700 million of annual cost and capex synergies by the fifth full year post-completion, with an implied NPV of over £7 billion.
- Current Vodafone UK CEO Ahmed Essam will become MergeCo CEO, and current Three UK CFO Darren Purkis will take the role of MergeCo CFO.
- The Transaction is expected to close before the end of 2024, subject to regulatory and shareholder approvals.
Margherita Della Valle, Vodafone Group Chief Executive, said:
“The merger is great for customers, great for the country and great for competition. It’s transformative as it will create a best-in-class – indeed best in Europe – 5G network, offering customers a superior experience. As a country, the UK will benefit from the creation of a sustainable, strongly competitive third scaled operator – with a clear £11 billion network investment plan – driving growth, employment and innovation. For Vodafone, this transaction is a game changer in our home market. This is a vote of confidence in the UK and its ambitions to be a centre for future technology.”
Canning Fok, Group Co-Managing Director of CK Hutchison, said:
“Today’s announcement is a major milestone for CK Hutchison and for the UK. Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital. This has long been a challenge for Three UK’s ability to invest and compete. 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 will unlock significant value for CK Hutchison and its shareholders, realise material synergies, reduce net financial indebtedness and further strengthen its financial profile.”
Ahmed Essam, Vodafone UK Chief Executive, said:
“The combination of Vodafone UK and Three UK will bring more choice and better value to customers nationwide. With scale to invest, we will create a best-in-class 5G network, supporting the Government’s 5G ambitions, drive digital transformation and create jobs. Through converged offers we will really challenge the two largest operators and, of course, we will continue to support the most vulnerable in society with our social tariffs and our commitment to help 6 million people cross the digital divide by 2025.”
Robert Finnegan, CEO of Three UK, said:
“Today’s news marks a significant step in our efforts to create a business that will build the biggest and fastest 5G mobile network in the country. The combination of Three UK and Vodafone UK will bring the advantages of 5G to every business and household in the UK, enabling the UK to deliver its ambitions for digital and economic growth and fully supporting the UK Government’s objectives for a world-leading digital economy.”
For more detailed information about the transaction please refer to the announcement published on the websites of the Hong Kong Stock Exchange and of CK Hutchison: www.hkexnews.hk and https://www.ckh.com.hk/en/ir/announcements.php
CKHGT will host a webcast presentation and Q&A that will start promptly at 4:30pm HKT (9:30am BST) on 15 June 2023 for analysts and investors.
Vodafone UK and Three UK have launched a microsite vodafoneandthree.uk with more information about MergeCo that will be updated on a regular basis.
For more information, please contact:
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Vodafone Investor Relations investors.vodafone.com ir@vodafone.co.uk |
Vodafone Media Relations Vodafone.com/media/contact GroupMedia@vodafone.com |
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CK Hutchison Investor Relations ckh.com.hk/en/ir ir@ckh.com.hk |
CK Hutchison Media Relations ckh.com.hk/en/media/contact vodafoneandthree@teneo.com |
About Vodafone
Vodafone is the largest pan-European and African telecoms company. Our purpose is to connect for a better future by using technology to improve lives, digitalise critical sectors and enable inclusive and sustainable digital societies.
We provide mobile and fixed services to over 300 million customers in 17 countries, partner with mobile networks in 46 more and are also a world leader in the Internet of Things (IoT), connecting over 160 million devices and platforms. With Vodacom Financial Services and M-Pesa, we have the largest financial technology platform in Africa, serving more than 56 million people across six countries.
We are committed to reducing our environmental impact to reach net zero emissions by 2040, while helping our customers reduce their own carbon emissions by 350 million tonnes by 2030. We are driving action to reduce device waste and achieve our target to reuse, resell or recycle 100% of our network waste.
For more information, please visit www.vodafone.com, follow us on Twitter at @VodafoneGroup or connect with us on LinkedIn at www.linkedin.com/company/vodafone.
About CK Hutchison Holdings Limited
Listed on The Stock Exchange of Hong Kong Limited, CK Hutchison Holdings Limited (CK Hutchison) is a renowned multinational conglomerate committed to innovation and technology with businesses spanning the globe. With operations in about 50 countries/markets and 300,000 employees worldwide, CK Hutchison has four core businesses - ports and related services, retail, infrastructure and telecommunications. The Group is fully committed to its environmental and social sustainability responsibilities with policies, programmes and innovations across its businesses to address sustainability challenges such as the net-zero transition.
CK Hutchison reported turnover of approximately HKD457 billion for the year ended 31 December 2022.
For more information, please visit www.ckh.com.hk.