Three Britain, CK Hutchison face hurdles to deal deal

People familiar with the matter said that Three Britain and Bloomberg Group Plc are trying to overcome a raft of regulatory and political hurdles that threaten to derail efforts to create Britain's largest mobile operator.

Discussions between Vodafone and Three s owner CK Hutchison Holdings Ltd. have been delayed in recent weeks due to considerations about the integration and impact of their proposed tie-up, and they asked not to be identified talking about confidential information. They added that the news that Vodafone's Chief Executive Officer Nick Read will step down at the end of the year has complicated things.

Competition watchdogs are concerned with any move that could see a smaller rival take the market out of the market, according to the people.

Vodafone and CK Hutchison want to steer clear of antitrust concerns that fewer network providers would mean less pressure to reduce prices, at a time when double-digit inflation is squeezing British consumers. The people said that they wanted to show that a merger would boost rural 5 G rollout in the UK.

The share price of Vodafone fell for a fifth day on Wednesday, dropping as much as 3.3% to the lowest intraday level since September 1997.

Representatives for CK Hutchison and Vodafone didn't want to make a statement.

Vodafone and CK Hutchison are in discussions about merging their UK businesses in October. Under the proposed terms, Vodafone would own 51% of the new venture, with the rest held by Hong Kong-based CK Hutchison.

While CK Hutchison has operated Three in Britain for more than 20 years, the companies have become sensitive to China's increasing influence in Hong Kong and whether this could stir UK political intrigue in a deal, the people said. In 2020, the UK banned 5 G equipment from China's Huawei Technologies Co. and last month blocked a Chinese firm s takeover of a semiconductor wafer factory in Wales under new stronger takeover rules.

Vodafone and CK Hutchison are eager to make a pitch about the fact that CK Hutchison has operated other important UK infrastructure, including ports and power networks, for years without issue, as a way of assuading any concerns among British policymakers, according to the people.

After the departure of Read, pressure to find resolutions to these issues is only going to grow, with one influential Vodafone shareholder already signaling he wants to see the carrier streamline its operations. Telecom tycoon Xavier Niel said he was ready to advise the Vodafone board to sell off business and create a leaner operation. Niel's investment vehicle Atlas Investissement revealed a 2.5% stake in Vodafone in September.

During his time in charge, Read struggled to finalize deals that would have reduced the number of players in Vodafone's key markets in the UK, Italy and Spain. He will leave the company after failing to stop a long slide in its share price.

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