Could Vodafone and Three be next UK mega-merger?

It has been little over a year since mobile operator O2 tied-up with cable broadband provider Virgin Media to create a new telecom giant ‘Virgin Media O2’. Unlike Three’s proposed takeover of O2, which was blocked by the regulators back in 2016 due to competition concerns, this merger was approved as it involved two service providers with complementary businesses creating a new entity to accelerate investments in 5G and fibre networks.

Recently, it has being reported that Vodafone and Three are in talks about a potential merger. The main rationale for coming together in this case seems to be to drive scale and reduce costs in the mobile sector, as opposed to convergence in the case of the O2 and Virgin Media merger.

UK telecom landscape

UK telecom landscape_Counterpoint Research


How likely is the Vodafone and Three merger to be approved?

Operators’ perspective: The UK is a competitive market, with operators providing unlimited data plans as well as a wide array of MVNOs offering discounted services. Vodafone, the current third largest operator, has been under pressure from its investors to improve returns, whereas Three, the UK’s number four operator, has reported flat revenue growth for last few quarters and has been vocal on the need for structural changes to the UK telecoms market. Therefore, the main reason behind the Vodafone and Three merger is to increase subscriber share (the merger would create a market leading entity) and lower operating costs.

Another rationale could be RAN sharing and cost reduction, as the two operators have a similar set of frequencies in the sub-6 GHz range. The two operators combined can create a more sustainable and stronger player with increased ability to network investments and benefit from economies of scale.

5G Spectrum Portfolio of Vodafone and Three UK

5G Spectrum Portfolio_Counterpoint Research

Regulator’s perspective: The primary concern around this deal would be the reduction of the number of players from four to three. Some studies show that such reduced competition can lead to increased prices and negatively impact service levels. In addition, regulators are wary of mergers creating a dominant player in the market. As a result, this merger may collapse for similar reasons as Three’s takeover bid of O2.

However, while the Vodafone and Three merger would create a market leading entity, the resultant approximate 30% subscriber market share would be similar to its competitors. In addition, regulators are suspected to be a little more sympathetic towards mergers these days than in the pre-pandemic times.

Vodafone and Three UK merger_Counterpoint Research


What has changed post-pandemic?

Connectivity services played a very important role throughout the pandemic, emerging as a lifeline for consumers. Many businesses and some aspects of life are now fully dependent on telecom services. Therefore, if a merger promises increased network investments to improve connectivity and quality of service, regulatory authorities are expected to be more flexible and take a softer stance than in the past.

M&A activity in other competitive markets of Europe

  • Spain: Orange (the second largest operator) and Masmovil (the fourth largest operator) recently signed an agreement worth €18.6 billion ($19 billion) to combine their operations and form a 50-50 joint venture. The new entity will become the country’s largest operator with more than 40% subscriber market share.
  • Italy: At the beginning of 2022, Vodafone and Iliad were in talks to merge their units amid cut-throat competition in the Italian market. However, Vodafone rejected Iliad’s preliminary offer of €11.25 billion ($12.92 billion) citing a lack of value-add for its shareholders. The operator is still ready to evaluate other opportunities.

Additionally, Telecom Italia (TIM) hopes to get the right valuation for its fixed-line assets, which the operator plans to sell and raise cash to cut its debt.

These developments indicate there is increasing consolidation occurring in both the mobile and fixed telecom space. Additionally, many operators have spun-off their tower business or launched joint ventures in order to raise money for network investments or reduce debts. For instance, Deutsche Telekom (DT) has recently announced the sale of 51% of its tower business, GD Towers, to a consortium for €17.5 billion ($17.5 billion). The transaction will help the operator with much needed cash to cut debt and proceed with its target of acquiring a majority stake of 50.1% in T-Mobile US (an increase from its current stake of 48.4%).


The UK’s telecom market is characterised by fierce competition, and it is difficult for the operators to grow organically. Key factors that influence operators’ ROI include weakened bargaining power in the procurement of 5G network equipment (in view of the ban on Chinese vendors Huawei and ZTE), competition from other ecosystem players in the enterprise segment (particularly private networks) and increasing cost pressures. Mergers in such an environment help achieve economies of scale through an increased number of subscribers, pooling of resources and lower operating costs. It is likely that the Vodafone – Three merger will be approved and thus improve the overall quality of infrastructure, but only after close scrutiny from regulatory bodies.

Interestingly, Virgin Media O2, Vodafone and Sky are also rumoured to be interested in acquiring broadband service provider TalkTalk. Going by the recent trends it looks to be only a matter of time before we see the next mega-merger in the UK market. There is a high likelihood of the market evolving to a smaller number of integrated telecom operators offering fixed-mobile convergence services and diversifying the way they engage with consumers. One can see such positive impacts from the Virgin Media O2 case, as the new operator recently reported on its first anniversary that there is a growing adoption of converged services, with 45% of its broadband customers also taking a mobile contract.



Related Reading

Europe Monthly Report – Russia-Ukraine War and its impact on the European Smartphone Market

Europe Smartphone Shipments Decline 11% YoY in Q2 2022 as Macro Climate Continues to Deteriorate

UK Operators Face Tight Deadlines to Roll Out Shared Rural Network

Impending Telecom Duopoly to Weigh on Thai Market Competition?

The merger between Thailand’s DTAC and True Corp is on track as the companies have secured approval from their respective boards. This will go on to create the country’s largest mobile operator by subscribers. The merger now awaits regulatory approval.

Currently, there are three large players in the market – AIS, TrueMove and DTAC. The fourth operator – National Telecom (NT) – was formed in January 2021 after the merger of two state-owned telecom operators (CAT and TOT) and does not have any significant market share. One can say that the second round of consolidation has kicked in in the industry. If the DTAC-True merger is cleared by the regulator, it will shrink Thailand’s mobile landscape to a duopoly, with the new merged entity controlling more than 50% of the market.

Thailand’s Telecom Landscape

Thailand Telecom Landscape - Counterpoint Research

The merger would send ripples across the telecom ecosystem and networks would be impacted one way or the other. Some of these implications are as under:

Advantages of scale

A major objective of the merger is to scale the business size to drive investments and cost efficiencies, especially when it comes to 5G. True’s high debt level and DTAC’s limited 5G service offering make it challenging for the two to make technology advancements without any immediate returns. The merger will strengthen the position of the new entity with a higher market share, improving its ability to absorb costs and set up a stronger 5G infrastructure with pooled resources. This, in turn, will improve its ability to effectively take on the competition.

On the other hand, AIS has enhanced scale, financial strength and capabilities needed to accelerate growth and support network expansion. It is way ahead of its competitors with more than 44 million subscribers and benefits from economies of scale to achieve return on investments.

Expansion in spectrum portfolio

DTAC has been continuously losing subscribers amid intense competition, lack of 5G services and low network coverage owing to inferior spectrum holding. The merger will lead to True combining its 990MHz of spectrum holding with DTAC’s 270MHz, resulting in enormous spectrum availability of 1,260MHz with the new entity. This is a big value addition as large spectrum holding is the key to rolling out new services and improving capacity with the growing demand.

Operator Spectrum Portfolio Before and After Merger

Thailand Spectrum Portfolio - Counterpoint Research

Technology-driven growth opportunities

The new entity is seeking to raise $100-$200 million in venture capital for the proliferation of the digital ecosystem. The race for the advent of new technologies and services is likely to get a push from this merger. Operator will aim for 5G leadership and capturing enterprise opportunities with AI, cloud technology, connected devices, Industry 4.0 and more.

Wave of consolidation

The scenario can be compared with consolidation in various other markets of APAC. Higher 5G investment requirements and intense competition are the major reasons for several markets of the region to have three or just two major operators. For instance:

  • Indonesia: Indosat Oordeoo and CK Hutchison completed their merger in January 2022 and now the largest three players control more than 90% market share.
  • Malaysia: There are three major operators in the country. Axiata and Telenor are in advanced discussions to combine their Malaysian operations, i.e. Celcom and Digi. The merged entity will be the largest mobile operator with over 44% subscriber market share.
  • India: The Indian telecom market has seen significant consolidation, from a peak of 15 operators in 2012 to just three with a noteworthy presence in the last few years. But the market has a near duopoly as Airtel and Jio are leading the market, whereas Vodafone Idea is bleeding with inadequate investments and a high churn rate among subscribers. It may not come as a big shock if the market shrinks to two major players.

On the contrary, the Philippines had to move away from duopoly to inject much-needed competition. The regulator awarded the operator license to Dito Telecommunity as the country’s third operator since it became necessary to improve service provision and drive down prices. Dito launched mobile services in March 2021. Another entrant, NOW Telecom, secured the license in September 2020 but it is yet to launch commercial services.

Way ahead

Thailand has a highly developed mobile market that has seen strong growth of its 4G subscriber base. While mobile connectivity is upstanding, its quality has the capacity for further enhancement. According to Ookla’s Speedtest Global Index, Thailand ranked 58th (out of 142 countries) with a median mobile download speed of 33.49Mbps in March 2022. It has better network performance compared to many Southeast Asian countries but is still behind Brunei (71.38Mbps), Singapore (67.99Mbps) and Vietnam (33.90Mbps). It is now navigating to 5G and the market will be driven by increasingly faster speeds at competitive tariffs.

The merger is in its final stages but it may face regulatory roadblocks over the fear of a narrow playing field. The new operator is expected to harness its combined resources to drive network performance. Further rollouts of its network to enhance quality and speed, along with investment in 5G technology, will be the key areas of development. Despite the endorsed benefits, long duration of the merger and any instability in the quality of services during the process can create an adverse impact on consumer sentiments. This, in turn, would be beneficial for AIS, with a likelihood of subscribers upgrading plans from LTE to 5G. Another market implication could be the rise in tariffs and vanilla service offerings amid reduced competition. Taking clues from the Philippines’ trajectory, the regulator needs to make a cautious decision on this merger and ensure the market does not go down the same road.


Related Reading

Thailand Smartphone Shipments Down 10% YoY in Q1 2022 on Sluggish Economy, Supply Constraints

Southeast Asia Smartphone Channel Share Tracker Presentation: Q1 2022

Southeast Asia Monthly Smartphone Channel Share Tracker: March 2022

Verizon’s TracFone Acquisition: What it Could Mean for the Wireless Industry

Verizon Communications announced on Monday that it would buy América Móvil’s wireless service TracFone in a $6.25 billion cash and stock deal. Verizon says it expects this deal to be completed in the second half of 2021.

The deal will be split into $3.125 billion cash and $3.125 billion Verizon common stock. In addition, following the closing of the deal, Verizon shall pay to América Móvil:

  • Up to $500 million as an earn-out if TracFone continues to achieve certain performance measures during the 24 months following the closing, calculated and paid in four consecutive six-month periods
  • 150 million deferred commercial consideration payable within two years following the closing

TracFone Verizon Subscriber


What it could mean:

  • Even more consolidation: If approved, this will further consolidate the industry and catapult Verizon to the largest prepaid service operator in the US. Verizon had 4 million prepaid connections in Q2 2020 and TracFone would add 21 million subscribers.
  • Retail expansion: Verizon would gain share in national retail channels, especially in Walmart via the Straight Talk brand. TracFone has had success in retail channels such as Walmart, Target, BestBuy, and even offers a limited SKU of devices and SIM cards in stores such as Kroger’s and Dollar General. TracFone is present in over 90,000 retail locations nationwide.
  • Network availability: It is unclear if Verizon would switch the new TracFone network over to be 100% Verizon based. There are 13 million TracFone customers who use the Verizon network. This means 8 million customers would have to transition to the Verizon network and use a Verizon compatible device. TracFone has historically had agreements with four major carriers to run its network (Verizon, AT&T, T-Mobile, and Sprint). This created different device SKUs depending on the area subscribers live in and the coverage that was available.
  • OEM opportunities: Verizon is expanding into the value segment with this deal. Verizon’s stealth MVNO Visible has ranged devices from the struggling ZTE and newcomer Hot Pepper and Verizon Prepaid’s lineup includes devices from Nokia and Wiko. These OEMs could benefit from the acquisition by potentially having more of their devices featured in TracFone and its sub-brands.
  • 5G push: Lastly, this move will push Verizon’s 5G ambitions forward, especially when it begins its sub-6 GHz 5G service via dynamic spectrum sharing in 2021. However, 5G will only be truly accessible to a large swath of the US population once 5G devices get below the $200 price point. For TracFone subscribers, the ideal sweet spot would be below $100.

While the deal was just announced, a lot of regulatory hurdles still need to be overcome before it gets approved. With the T-Mobile-Sprint merger, we have seen already how long large mergers and acquisitions can take in the telecom sector. The FCC will need to be convinced that this move will truly increase competition and improve the wireless industry as a whole. More to come here and we will continue updating on this as it develops.

Term of Use and Privacy Policy

Counterpoint Technology Market Research Limited


In order to access Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
Personal Information When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.

How to unsubscribe and Termination

You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time. In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.

Website Content and Copyright

This Website is the property of Counterpoint and is protected by international copyright law and conventions. We grant users the right to access and use the Website, so long as such use is for internal information purposes, and User does not alter, copy, disseminate, redistribute or republish any content or feature of this Website. User acknowledges that access to and use of this Website is subject to these TERMS OF USE and any expanded access or use must be approved in writing by the Company.
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.

Changes or Updates to the Website

The Company reserves the right to change, update or discontinue any aspect of this Website at any time without notice. Your continued use of the Website after any such change constitutes your agreement to these TERMS OF USE, as modified.
Accuracy of Information: While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.

Third Party Links: This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.

Cookies and Tracking

We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans.
Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.