2/11/2009 12:57:00 PM
Difficulties in buying 3 UK
At the risk of having an embarrassing Alan Hansen-esque ‘you cannae win titles with kids’ moment, I’d like to stick my neck out and make a prediction: Vodafone will not repeat the Australian merger deal with 3 in the UK. I’ll go further and say even the more likely deal between 3 and T-Mobile in the UK won’t happen either.
Let’s start with Vodafone. If the mergers and acquisitions enthusiast Nick Read didn’t see viability for a deal while in charge at Vodafone UK over three years, it’s unlikely his successor will.
The problem with the prospect of a T-Mobile acquisition of 3 is that Deutsche Telekom lacks the resources. The mood in Bonn is for cost-cutting, rather than countenancing a multibillion-pound deal to buy a business with four million customers.
A merger is more realistic, but also poses problems. Unlike the Vodafone-3 Australia deal, T-Mobile and 3 don’t share a similar equitable scale. T-Mobile is smaller than O2, Vodafone and Orange, but not by much. 3, by comparison, is considerably shy of its rivals in terms of customer numbers and annual revenue. A joint venture would therefore involve a substantial charge on 3’s parent company, Hutchison Whampoa.
Hutchison Whampoa’s intentions for 3 UK remain unclear. 3 is doing lots of progressive things in the market but its run-rate for acquiring customers appears to have stalled. It is revelling in its role as disrupter in the current market, by pricing and banging the regulation drum. It is tweaking the incumbents’ noses, who would certainly welcome the acquisition of 3, even if it empowers a new 3-T-Mobile axis.