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Li Ka-shing (left) and his elder son Victor.
China News Service via Getty Images
CK Hutchison Holdings, controlled by Hong Kong’s richest person Li Ka-shing, and Vodafone Group have agreed to merge their British telecommunications businesses that would create the country’s largest mobile operator.
CK Hutchison will control 49% of the combined business while Vodafone, Britain’s third largest mobile provider, will own the remainder, the companies said in a statement Wednesday. Vodafone will have the right to buy out the merged business from CK Hutchison after three years, if it reaches a value of at least £16.5 billion ($20.9 billion) including debt.
The combined business will invest £11 billion in the U.K. over a decade to create “one of Europe’s most advanced standalone 5G networks,” according to the statement. CK Hutchison and Vodafone said it will offer mobile broadband to 82% of Britain’s households by 2030.
The transaction is set to close before the end of 2024. Upon completion, the new company will overtake two leading mobile providers in the U.K., namely Virgin Media O2, a joint venture between Liberty Global and Spain’s Telefonica, and BT Group’s EE.
“Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital,” Canning Fok, co-managing director of CK Hutchison, said in the statement. “Together, we will have the scale needed to deliver a best-in-class 5G network for the U.K., transforming mobile services for our customers and opening up new opportunities for businesses across the length and breadth of the U.K.”
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A mobile phone store of CK Hutchison’s Three UK on Oxford Street in central London.
Hollie ams/Bloomberg
The business merger, however, is expected to face scrutiny from British competition regulators. Unit, one of the biggest trade unions in the U.K., has voiced concerns about higher prices for consumers and job cuts following the tie-up.
Back in 2016, the European Union’s antitrust regulators blocked CK Hutchison’s plan to become Britain’s leading mobile operator by acquiring O2 from Telefonica. The regulators said at the time the move would have led to higher mobile prices in the country.
The business tie-up comes as CK Hutchison continues to pursue an “asset-light” strategy in recent years. Just in May, the Hong Kong-headquartered conglomerate said it would form a joint venture with Stockholm-based private equity giant EQT to provide wholesale mobile and fixed communications services in Italy. Under the deal, CK Hutchison would transfer part of its Italian mobile business to the new company.
CK Hutchison is one of the two flagship companies of the business empire founded by Li, whose net worth is currently estimated at $37.8 billion. CK Hutchison has business operations spanning ports, retail, infrastructure and telecommunications in about 50 countries. Li retired as chairman of CK Hutchison in 2018 and handed over the reins to his elder son Victor.
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