Vodafone reportedly in UK merger talks with Three-owner Hutch

The UK telecoms could be set for more consolidation after reports emerged claiming Vodafone has held initial talks about a merger with Three UK.

The Financial Times has reported that Vodafone Group has entered talks with Three-owner CK Hutchison about combining their respective UK telecoms businesses following pressure from investor group Cevian Capital.

Vodafone UK is currently the market’s third largest mobile operator, while Three sits in fourth, behind BT and VMO2. But the telecoms giant has come under increasing pressure to simplify its portfolio, either through mergers or sales, with CEO Nick Read acknowledging in February that it is in the market for deals.

For Three owner Hutchison, this isn’t the first time it has looked at options for its UK business, as it had previously agreed on a merger with O2 (then owned by Telefonica) only for European regulators to block the deal. O2 then struck a merger deal with Virgin Media, creating VMO2.

Any move to reduce the number of operators in the market will again likely bring regulatory scrutiny, although signals from regulators suggest they may have realised the value of network investment during the COVID-19 pandemic.

CK Hutchison has sought scale for Three UK for the last decade, although it has struggled to catch up with larger rivals in terms of connection base.

Both Three and Vodafone were unavailable for comment.