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Three CEO calls for "structural change" in mobile market amid rumour of Vodafone merger

Analyst suggests merger is likely following Three's failed attempt to acquire O2 in 2015

A ThreeUK shop sign

The chief executive of mobile operator Three has renewed his calls for “structural change” in the UK’s telecommunications sectors, describing the UK market with four operators as “dysfunctional”.

CEO Robert Finnegan had previously called for “fewer players”, advocating for a consolidation that would bring the number of main telecoms to three instead of four.

“The UK market with four operators continues to remain dysfunctional and requires a structural change to improve the overall quality of infrastructure that UK customers should expect,” Finnegan said on Wednesday as part of Three’s financial results announcement, which reported an overall revenue growth of 4% to £2.44 billion.

The comment comes amid intensified rumours of a merger between Three and Vodafone that would align with Finnegan's aspirations for narrowing the UK telecommunications market.

Telco analyst Paolo Pescatore said that a consolidation between the two is likely and would be beneficial for Three UK “given its mobile-only position”.

“Both Three and Vodafone are in a challenging position given the growing importance of convergence. Ultimately scale is key and with this in mind a move to merge could make sense,” he told IT Pro, noting that there are “few strategic moves left” in the UK market.

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However, Pescatore also warned that the merger might not have the effects Finnegan is likely looking for:

“While Vodafone is addressing this through wholesale agreements in the fixed line market, it is unclear whether a merger with Three UK is the silver bullet,” he said, adding that Vodafone “will need to move quickly to avoid losing further ground”.

Vodafone declined to comment on the reports.

The rumours of an impending consolidation come less than one year after the £31 billion merger of Virgin Media and O2 parent companies Liberty Global and Telefónica was formally approved by the UK’s Competition and Markets Authority (CMA).

In 2015, Three was one of the main contenders to merge with O2, offering a proposed sum of £10.25 billion for the deal that was deemed unwelcome by Ofcom and ultimately blocked by the European Commission in May 2016.

Months later, Three UK launched legal action against the EU regulator, with the European Court of Justice annulling the 2016 decision in May 2020.

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