Vodafone and Three in merger talks

Image source, Getty Images

They are talking about merging their businesses.

Combining the third and fourth largest mobile phone networks would create a business with 27 million customers, larger than the current leaders.

It would speed up the roll out of 5G and rural broadband.

The Competition and Markets Authority would scrutinize any deals.

There are reports that the companies are close to a deal.

Under the deal being discussed, Vodafone will own a majority of the company.

The number of networks in the UK has been opposed by regulators.

A new approach might be suggested by a recent report from the communications regulators.

In the last few years, it has been found that the returns on investments have been lower than the cost of capital.

There are still hurdles to overcome for the merged firm according to James Robinson.

"While the parties might view consolidation as a way to improve returns andunlock shareholder value, we expect the CMA to be eager to protect against the risk of consumer price rises - particularly in light of the current cost-of-living crisis," he said.

He suggested that the merged firm might need to make legal-binding concessions.

Ben Wood said that the tie-up was expected.

He said that the two companies were interested in consolidation.

Scale is the main motivation to join forces. The most successful companies tend to be the largest; bulking up would offer many synergies and cost-saving opportunities.

It's hard to see either operator growing to challenge Virgin Media O2 in the UK.

In the UK, there are other possible tie-ups.

There are other deals involving Virgin Media O2, Talk Talk and Sky.

The combined businesses will be able to accelerate the roll out of full 5G in the UK and expand broadband to rural communities and small businesses.

The UK is at risk of losing the chance to be a 5G leader if the conditions are not nurtured.

Ofcom didn't have a fixed position regarding market consolidation.

It said in its latest report that potential mergers in telecoms markets need to be assessed on a case-by-case basis rather than on a presumptive view of the appropriate number of competitors.