Vodafone to merge with Three but CMA could block the deal

Vodafone (LON: VOD), the struggling telecommunication company, concluded talks with CK Hutchison on Wednesday. The two companies will combine their UK businesses to create a major telecommunication with millions of companies.

In a statement, Vodafone said that it will own 51% of the entire company while CK Hutchison will own the rest. The deal, which must be reviewed by the Competition and Markets Authority (CMA), hopes to boost the two companies’ market share.

The new entity will now leave the UK with three main telecommunication companies. EE, which is owned by BT Group, has a substantial market share in the country. The other major company in the sector is O2, which is owned by John Malone’s Liberty Global and Telefonica.

Therefore, there is a likelihood that CMA will block the deal, citing competition issues. Just recently, the agency shocked the world when it rejected the combination of Microsoft and Activision Blizzard, as we wrote here.

The deal comes at a tough time for Vodafone. The Vodafone share price has plunged by more than 20% this year and is one of the worst performers in the FTSE 100 index. At the same time, the company is loaded with over 69 billion euros in debt.

At the same time, the company is facing some currency headwinds. For example, its Turkish and Kenyan businesses are being affected by the weak lira and Kenyan shilling. Vodafone Idea, its Indian business recently came on the verge of collapsing.