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Vodafone plots mega merger with Three: Talks to create mobile giant with 27million customers 

Mobile merger: Vodafone and Three are in talks to merge their UK businesses in a deal that would create Britain's largest mobile provider with over 27 million customers

Vodafone is preparing a mega merger with Three:Talks to create a mobile giant with 27 million customers

Vodafone and Three are planning a merger that would create Britain’s largest mobile provider with more than 27 million customers.

The telecom companies are in talks to combine their UK operations in a deal that could be completed by the end of the year.

Vodafone confirmed the plans after a Sky News report suggested talks have intensified in recent weeks.

Mobile merger: Vodafone and Three are in talks to merge their UK businesses in a deal that would create Britain's largest mobile provider with over 27 million customers

Mobile merger: Vodafone and Three are in talks to merge their UK businesses in a deal that would create Britain’s largest mobile provider with over 27 million customers

The FTSE 100 giant said it would hold a controlling 51% stake in the combined company, while Three’s owner, Hong Kong conglomerate CK Hutchison, would hold the rest.

Vodafone is under pressure from investors including French tycoon Xavier Niel and activist Cevian Capital, who took a stake earlier this year and are pushing for the company to strike more deals in its markets and simplify its structure .

The mobile operator’s chief executive, Nick Read, also said he wanted to pursue mergers in markets he felt were suffering from excessive competition, including the UK.

Read is under pressure to revive Vodafone’s lagging share price performance. It has fallen by around a fifth since taking office in 2018. The shares rose 2.6%, or 2.6p, to 103.72p yesterday.

The deal would see Vodafone and Three, the third- and fourth-largest carriers, skip EE and Virgin Media O2, formed by a merger last year. EE has 20 million customers in the UK, while Virgin Media O2 has 24 million.

If agreed, the tie-up will almost certainly be subject to scrutiny by the competition watchdog and Ofcom, the industry regulator.

But Vodafone said without the merger neither company would have the “scale necessary” to invest in rolling out 5G – a priority for the government.

A spokesperson said: “The conditions to ensure thriving market competition must be nurtured or the UK risks losing the opportunity to be a 5G leader.”

The company cited an Ofcom report describing the two operators as “subscale” and unable to reap the rewards of investing in the expensive technology.

Rivals: Deal would see Vodafone and Three, the third and fourth largest carriers, leapfrog EE and Virgin Media O2, formed by a merger last year

Rivals: Deal would see Vodafone and Three, the third and fourth largest carriers, leapfrog EE and Virgin Media O2, formed by a merger last year

Vodafone said the combined company would support the rollout of 5G in the UK, extending internet access to rural communities and small businesses.

He added that the company would challenge Virgin Media O2 and EE, providing a “high quality, reliable third network”.

A source familiar with the deal said the companies were optimistic about a possible Ofcom investigation, but getting approval from the Competition and Markets Authority (CMA) would be “a nightmare”.

An investigation by the watchdog would likely focus on whether the merger would allow Vodafone and Three to drive up prices for customers.

But the companies believe a tie-up would allow them to spread the huge cost of operating their mobile network, leading to lower costs for users.

The CMA previously raised concerns about a tie-up between Three and O2, which was ultimately blocked by the European Commission.

Paolo Pescatore, telecoms analyst at PP Foresight, said the biggest hurdle will be getting CMA and Ofcom approval.

But he warned that even if the deal succeeds, there is “no magic bullet” that will reverse the fortunes of the two companies.

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