6 months ago • 2 mins
What’s going on here?
Vodafone and Three UK turned their flirting into a full-blown relationship on Wednesday, agreeing to merge their UK mobile businesses.
What does this mean?
Vodafone and Three aren’t small fry by any means, but they’re still dwarfed by their competition. BT and Virgin each hold around a third of the UK cell provider market, while Vodafone and Three own just one-third between them. But this deal could help the duo catch up. If it goes through, Vodafone will keep control with a 51% stake in the pairing, with CK Hutchison – Three UK’s owner – holding the remaining 49%. And because Vodafone’s investors haven’t had much else to watch besides a decade-long stock-price slide, they decided something was better than nothing and sent the stock up after the news.
Why should I care?
Zooming out: Phone bills are pricey.
Mind you, it wasn’t always this way. Vodafone swaggered around with more than a £200 billion ($250 billion) market valuation at the start of the millennium. But the firm’s heyday has faded into the distance, leaving it nursing a paltry £20 billion ($25 billion). All that, at a time when humans became increasingly hooked to small rectangles of dopamine-heavy light. But that’s exactly the issue: phone operators need to funnel cash into network upgrades now that impossibly fast connection and unlimited data allowances are taken for granted – and poor old Vodafone’s struggling to keep up.
The bigger picture: Life’s unfair.
In theory, Vodafone’s partnership with Three could lighten that burden of network upgrades while cutting costs at the same time. But that’ll only work out if the government’s on board: wary of three mammoth players ripping off everyday text addicts, regulators could block the bid as they did with Microsoft’s Activision deal. And while Vodafone could argue that T-Mobile buying Sprint already turned the US market into a three-player game three years ago, the UK may well maintain a stiff upper lip.
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