Chinese-backed Vodafone merger ‘difficult’ amid security fears
VODAFONE’S talks to merge its UK business with that of Chinese-owned rival Three face an “extremely difficult” conclusion amid calls for any deal to be examined on national security grounds.
Three’s owner CK Hutchison, controlled by 94-year-old Hong Kong billionaire Li Ka-shing, and Ftse-listed Vodafone hope to push through a merger of their UK mobile units in a deal valuing the combined business at about £15bn.
While City sources have speculated that the tie-up is imminent, Frank Sixt, finance chief at CK Hutchison, warned that the talks faced hurdles. He said: “It is probable ... that we will reach an understanding with our friends at Vodafone. Although I would say they [Vodafone] are extremely difficult to draw a conclusion with on the one hand, but on the other hand they are, in the end, very good partners.
“So the first part makes me a little bit more sceptical, but the second part makes me a little bit more optimistic.”
A spokesman for Three UK would not comment on what the difficulties holding up the talks might be. Sources close to the parties insisted they believed discussions had been “very positive” and were progressing to their conclusion. Vodafone’s potential merger of its UK mobile arm with Three UK has been fiercely opposed by China-sceptic MPS and by unions amid concerns around national security and jobs.
The merger between Britain’s third and fourth largest mobile operators would create a business with a combined 27m customers.
The deal is likely to prove a key litmus test of Britain’s tightened-up takeover regime. The tie-up is expected to create a joint venture between Vodafone and Three, where the Hong Kongowned company will hold a 49pc stake that could reduce over time.
However, union bosses at Unite have written to Margherita Della Valle, Vodafone’s chief executive, warning of “profound national security questions” over the potential merger and have been lobbying MPS and officials over the deal.
Sir Iain Duncan Smith, a former Conservative Party leader, has urged officials to block any transaction.
Further complications could arise from any competition concerns over the merger, although industry executives believe it stands a good chance of being approved to reduce the number of players in the UK’S mobile market.
Mr Sixt’s remarks came as a British government minister visited Hong Kong for the first time in five years in a bid to boost business ties. Lord Johnson, the investment minister, held talks with Hong Kong leaders and met with Victor Li, chairman of CK Hutchison, to discuss its investment plans in the UK.
A Business Department spokesman did not comment on whether the merger talks with Vodafone were discussed. In its results for the first quarter yesterday, Three said it had grown its UK revenues by 5pc to £610m, and now had more than 10.3m customers.