Vodafone U.K. and Three discuss a possible merger

The Financial Times in London is reporting that Vodafone UK is considering a merger with Three UK.

If the deal happened, it would reduce the number of mobile network operators from four — Vodafone, Three, EE and Virgin Media O2 — to just three.

Vodafone and Three are the third and fourth largest operators, respectively, in the country. It’s way too soon to know if U.K. antitrust regulators would approve such a deal.

Local news outlets have speculated that Vodafone is interested in the deal because it’s being pressured by activist investor Cevian Capital, who is calling for more consolidation in the industry to cut costs and improve future revenues.

There’s already been consolidation in the U.K. wireless market. About a year ago, Liberty Global’s Virgin Media merged with Telefonica’s O2 in a $38.55 billion joint venture.

Analyst Kester Mann with CCS Insight, said, “A few years ago, a tie-up between Vodafone and Three would have felt like a unnatural pairing. But in recent times, Vodafone has taken on more of a challenger role, notably evidenced by its launch of speed-tiered unlimited data tariffs. Three’s traditional focus is on market disruption and providing value for money, so their cultures may not now be too far apart. Additionally, the two companies have joined forces before, having merged operations in Australia a few years ago."

But Mann cautioned, “Regulation would prove a significant hurdle to any deal. This is because it would instantly create a new market leader based on mobile customers and own a vast trove of 5G spectrum."

Open RAN

Meanwhile, the U.K. government has become a leader in the open radio access network (RAN) movement. This month it released a set of principles for developing and deploying open RAN equipment, which enables telecom providers to mix and match solutions from multiple vendors.

Vodafone is one of the leaders in open RAN. In a recent conversation with Fierce Wireless, Santiago Tenorio, director of network architecture at Vodafone, said the carrier is deploying open RAN commercially in the U.K., and it’s going to scale that up to use open RAN in 30% of its European networks by 2030.