Vodafone’s £15 Billion Acquisition of Three UK
Deal Overview
Merging Parties: Vodafone Group (Vodafone UK) and CK Hutchison Holdings (Three UK)
Total Transaction Size: £15 billion
Closed Date: 31st May 2025
Vodafone Group and CK Hutchison Holdings announced the merging of their telecom operations between their subsidiaries Vodafone UK and Three UK on June 14th, 2023. The main goal of the deal was to create a new capital-heavy investment into 5G infrastructure, as the new entity (VodafoneThree) promised £11 billion in UK network investment over 10 years. This was because Vodafone and Three were struggling to keep up with competitors like O2 and EE, who had superior numbers of customers. This struggle highlighted a critical issue with the two companies – they were losing money.
Company Details: Vodafone Group
Founded: 1981
CEO: Max Taylor (at time of merger)
Market Cap: £18.55 billion
Vodafone Group originated as Racal Electronics in 1980, founded by Ernest Harrison. In 1982, Racal Electronics became Racal-Millicom after a joint venture, and then in 1985, Racal-Millicom became Racal-Vodafone. In 1991, Racal Telecom demerged from Racal Electronics to become Vodafone Group. Although Vodafone purchased American service provider AirTouch becoming Vodafone AirTouch in 1999, the Company reverted back to Vodafone Group on 28th July, 2000.
Vodafone Group is a British multinational telecommunications company, operating in two primary segments: (1) Consumer Services, and (2) Business Solutions. Vodafone originally manufactured military radios as Racal Electronics, but after the UK General Electric Company gave Racal access to their battlefield radio technology, Racal began using that technology for civilian use, thus marking the beginning of their rise to commercial success. After partnering with Millicom to bid and receive the UK’s second cellular radio license, Vodafone began rapidly expanding the group through a series of hostile takeovers due the 1990s and 2000s, most notably their takeover of Mannesmann. Today, Vodafone Group is one of the largest telecommunication companies, with a market cap of £20.63 billion.
Company Details: CK Hutchison Holdings
Founded: 1950
CEO: Victor Li Tzar-kuoi (at time of announcement), Frank Sixt (at time of completion)
Market Cap: £16 billion
CK Hutchison Holdings was founded as Cheung Kong Industries in 1950 by Li Ka-shing. In 1971, the company was established as Cheung Kong Holdings, and acquired Hutchison Whampoa in 1979. After a major restructuring in 2015, Cheung Kong Holdings and Hutchison Whampoa were merged to form CK Hutchison Holdings.
CK Hutchison Holdings is a Hong Kong-based multinational conglomerate based in telecoms, infrastructure, ports, retail, and energy. As Cheung Kong Industries, the company was a plastics manufacturer before becoming a property investment company. Their success was due to their development of residential, office, retail, industrial and hotel properties in Hong Kong, which was a rapidly growing city in the 1970s and 1980s. After becoming the first Chinese company to majorly takeover a British “blue chip” firm (Hutchison Whampoa), CK Hutchison diversified their portfolio by building joint ventures and privatisations in European, Australian, and North American markets. Their key telecoms subsidiary was Three UK, which gained rapid success due to it being the UK’s first commercial 100% 3G network. Today, CK Hutchison Holdings has a market cap of 202.99 billion HKD which is £19.40 billion.
Legal Considerations & Points of Contention
In order to determine areas of legal concern, the Competition and Markets Authority (CMA) conducted an initial Phase 1 investigation of the deal from January to March 2024. The higher retail pricing and reduction of major UK mobile operators from four to three led to the CMA concluding that the merger would likely cause a “substantial lessening of competition”, thus elevating the investigation to Phase 2. From April to November 2024, the CMA gathered evidence into the potential harm and weak investment incentives from the proposed deal, collating these theories into an Issues Statement which was published in May. In September, the CMA issued provisional findings, concluding that the merger could lead to price increased and reduced access for Mobile Virtual Network Operators (MVNO). The investment commitments proposed by the parties were not credible due to a lack of binding undertakings. The parties disagreed with these views. However in November, the CMA issued a Remedies Working Paper that put forward a series of remedies to these issues, and the parties would have to comply if they wanted the merger to go ahead.
The legally binding undertakings were threefold: they would deliver their joint network plan across the UK over the next 8 years, they would cap selected mobile tariffs and data plans for 3 years, and they would offer pre-set prices and contract terms for wholesale services for 3 years. Vodafone and Three substantiated these remedies with the proposal of an Ofcom-enforceable £11 billion network investment, a proposed spectrum sale to VMO2, a commitment to maintaining tariffs at £10 or below for two years, and a reference offer to encourage MVNOs to access additional network capacity. On December 5th, 2024, the CMA issued its final report with the conditions that the parties signed these binding undertakings. By March 28th, 2025, the companies submitted the final undertakings and the CMA closed its investigation. The merger was completed by May 31st, and the joint venture, VodafoneThree, is monitored by Ofcom.
This was a controversial decision from a legal standpoint, as it is the first time the CMA had accepted a behavioural remedy in a telecom merger. This represented a significant policy shift, as the CMA had previously rejected behavioural remedies in sizeable cases such as those of Microsoft in the Activision and Blizzard acquisition. In fact, it is contentious as to why the CMA has moved to allowing behavioural remedies, as the CMA has officially stated that behavioural undertakings are often temporary fixes which are difficult to enforce and vulnerable to circumvention. Even a joint statement with the ACCC and Bundeskartellamt in 2021 showed that the CMA finds behavioural remedies burdensome and ineffective at recreating pre-merger competitive intensity.
Nevertheless, times are changing as behavioural remedies become increasingly acceptable. Insights from A&O Shearman show that the UK has rarely accepted behavioural remedies in Phase 2 investigations, but this is changing. The Financial Times reports that behavioural remedies have been accepted in up to 40% of conditional Phase 1 clearances between 2021 and 2023. Today, regulatory bodies are making decisions that our more in line with Prime Minister Keir Starmer’s priority of investment and growth with competition.
Future Implications
This deal caused considerable nationwide repercussion, in both the telecom industry and the M&A market. With the leading mobile network operators (MNOs) being reduced from four to three, and VodafoneThree creating the largest UK MNO with roughly 27 million customers, Vodafone has recovered their position as a key competitor in the industry. There is a real impact on day-to-day life, with a nationwide commitment to rolling out 5G, and a 40% 4G speed boost for 7 million users. Now, telecom giants like BT and O2 are accelerating investment in 5G to match this competition, and MVNOs like Sky are forced to rely on pre-set wholesale pricing agreements.
Financially, many concerns have been raised by this deal. The trade union, Unite, labelled the merger as a threat to consumers, warning that it could result in the loss of up to 1,600 jobs and the rise of mobile bills by as much as £300 per year. This was supported by Professor Tommaso Valletti, formerly the Chief Competition Economist at the European Commission, who found that these four-to-three mergers result in not only “substantially higher prices, but no overall improvement in investment”.
Post-merger, Vodafone and CK Hutchison have seen early successes, with Vodafone’s share price rising by 22% and an increase in organic service revenue. Analysts estimate the merger will result in £700 million in annual cost savings by FY 2030. It is clear the merger was a lifeline for Vodafone and CK, as they are now dominant in the UK market, and positioned effectively for long-term growth.
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