Exclusive: Vodafone and Hutchison to announce UK merger as early as Friday

HONG KONG/LONDON, June 7 (Reuters) – Vodafone (VOD.L) and C.K. Hutchison (0001.HK) They are in the final stages of agreeing to merge their British operations, with an announcement expected on Friday or early next week, three sources told Reuters.

Vodafone shares rose 3% after the news on Wednesday.

Vodafone will own 51% and Hutchison 49% of the combined group, which could be worth around 15 billion pounds ($18.6 billion) including debt, in line with an announcement made by Vodafone in October, one of the sources.

The respective shares would be achieved by adjusting debt ownership rather than exchanging cash, the companies said in October.

Talks over the deal to create Britain’s largest mobile operator have dragged on. Hutchison’s CFO Frank John Sixt said last month that getting over the line was proving to be “extremely difficult”.

Margherita Della Valle, new CEO of Vodafone is under pressure to reach agreements in the main markets to improve the performance of the pan-European and African operator.

His predecessor, Nick Read, identified Britain as one of four markets that would benefit from consolidation, but a lack of progress frustrated shareholders, prompting him to resign in December.

The merger will create Britain’s largest mobile operator with around 27 million customers, surpassing BT. (BT.L) EE and VM O2, owned by Telefónica (TEF.MC) and global freedom (LBTYA.O).

The deal will face intense scrutiny from regulators who have previously opposed deals that reduce the number of networks in major markets from four to three.

However, Vodafone and Hutchison have argued that the deal would benefit consumers by creating a network with the scale to implement full 5G and expand broadband connectivity.

Hutchison has said it is not covering the cost of its capital in Britain, which could hamper its ability to invest.

Ssources told Reuters in April that companies could commit to network investments as part of their approach to regulators.

Hutchison’s senior leadership met with British government officials in March to seek political support for the deal, the sources said. A few weeks later, the government confirmed its “openness to market consolidation.”

Hutchison and Vodafone declined to comment.

($1 = 0.8053 pounds)

Reporting by Clare Jim in Hong Kong and Paul Sandle in London; Written by Paul Sandle, edited by Kate Holton and Bernadette Baum

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