Britain's antitrust regulator is seeking market opinion on the merger of Vodafone (VOD.US) and CK Hutchison's British subsidiary ThreeUK before deciding whether to launch a formal investigation. Britain's Competition and Markets Authority (CMA) said on Wednesday it would give rivals and interested parties an opportunity to comment on the impact of the merger on competition in the UK.
Sarah Cardell, chief executive of the CMA, said: "We will also assess what impact it (the merger) may have on incentives to invest in the quality of the UK's mobile networks."
It is reported that in June this year, Li Ka-shing’s CK Hutchison announced that it had reached a binding agreement with Vodafone to integrate the two parties’ telecommunications businesses in the UK. CK Hutchison said it will establish a joint venture with Vodafone, and ThreeUK and VodafoneUK will become subsidiaries of the joint venture. The shareholders of the newly established joint venture include Vodafone and CKHutchison Group Telecom Holdings Limited, a European telecommunications company under CK Hutchison, with both parties owning 51% and 49% of the shares respectively.
People familiar with the matter said the deal would value the combined company's equity at around 9 billion pounds, and the new company would have about 6 billion pounds of debt, giving it an enterprise value of about 15 billion pounds. If the deal goes through, it will create the UK's largest mobile operator. However, the deal may face significant challenges in gaining approval from British regulators, who have taken a tough stance on antitrust issues in recent years.
In 2016, ThreeUK sought to acquire another operator, VirginMedia-O2, but was blocked by the European Commission on the grounds that "a significant reduction in market competition may lead to an increase in the price of mobile services in the UK" and "may harm innovation in the mobile field."
Additionally, NewStreetResearch analysts estimate that the antitrust investigation by the CMA and Ofcom could take up to 18 months. The deal has been opposed by Unite, which has raised the possibility of job losses and higher consumer bills. The merger is also expected to come under review under Britain's new national security regime.