The Vodafone and Three Merger

The Vodafone and Three Merger

In December 2024, the Competition and Markets Authority,(CMA) gave conditional approval to a £15 billion merger between Vodafone UK and Three UK. If completed, this would create the UK’s largest mobile network. It is being presented as  a big step forward for innovation, with the potential to expand 5G coverage and improve service. But while the headlines focus on growth and investment, it raises questions about whether this deal will actually deliver long-term value, or just distract from deeper issues within Vodafone.

Vodafone says the merger will unlock £11 billion In investment and push 5G coverage to 99% of the UK by 2034 (Vodafone, 2025). They also project over £700 million in annual cost savings by year five. These numbers are ambitious, but synergy estimates in M&A deals ur usually optimistic. As Williams (2025) points out, Vodafone’s current performance has been weak, with slow sales and falling share price. This considers whether the deal is really about growth or more about fixing short-term problems.

Theoretically, this move aligns with M&A strategy, where merging can increase economies and have a stronger market position. However, Aabo et al. (2021) argue that executive behaviour plays a big role in these deals Some CEOs are influenced more by ego and legacy rather than strategy. Although there is no direct claim of that here, Vodafone’s aggressive language about market leadership and bold synergy targets could reflect this kind of bias. The fact that the CMA did not ask for strong structural remedies makes the stakes even higher, combining the two different networks and company cultures will not be easy.

This is where governance matters. Zaid et al. (2020) argue that companies with diverse and independent boards tend to make better capital structure decisions and mabnage risk more effectively. With Vodafone and Three creating a new leadership team, how they shape their board will impact whether decisions are made in the interests of shareholders. Without strong oversight, there is a risk of repeating past mistakes like taking on too much debt or not delivering on promised results.

Another concern is the effect on the wider market. The merger reduces the number of major UK mobile operators from four to three.  Although the CMA approved the deal with conditions, consumer groups like Which? And the Fair Internet Coalition have raised concerns about reduced competition, fewer plan options and higher prices (The Guardian, 2024). James (2024) also states that smaller operators who rely on access to bigger networks may struggle to compete if Vodafone-Three dominates.

This links to Stakeholder Theory, which says businesses need to think beyond shareholders. Investors may welcome the deal, but that does not mean customers or smaller businesses will benefit. If prices rise or service quality drops, it could damage the brand in the long run. Trust matters in telecoms, Bihari and Pradhan (2016) explain that sustainable decision makings depend on governance frameworks that focus on long-term stakeholder outcomes. Without this, large investments can backfire and cause reputational damage.

Agency Theory also explains the risk of this merger. It looks at situations where managers prioritise personal goals like bonuses or legacy over shareholder interests. Vodafone is making major leadership changes as part of the merger (Vodafone, 2025) and if there is not clear accountability, there is a risk that strategic decisions will be made to suit executives over investors. This can lead to underperformance, especially when expectations are set too high.

Overall, this merger has the potential to reshape the UK mobile market. But potential does not guarantee results. If the merger does not manage governance well, overpromises or fails to deliver benefits for customers/the wider market, then the merger could end up doing more harm than good.

This case has helped me understand how theory connects to real-world business activity, especially in areas like corporate governance and executive behaviour. It has made me think more critically about how marketing decisions are influenced by wider financial and regulatory issues, which is important for me as I develop in my future career.

References

A.A Zaid, M., Wang, M., T.F. Abuhijleh, S., Issa, A., W.A. Saleh, M., & Ali, F. (2020). Corporate governance practices and capital structure decisions: the moderating effect of gender diversity. Corporate Governance: The International Journal of Business in Society, 20(5), 939–964. https://doi.org/10.1108/cg-11-2019-0343

Aabo, T., Als, M., Thomsen, L., & Wulff, J. N. (2021). Watch me go big: CEO narcissism and corporate acquisitions. Review of Behavioral Finance, ahead-of-print(ahead-of-print). https://doi.org/10.1108/rbf-05-2020-0091

Bihari, S. C., & Pradhan, N. S. (2016). Is the Public Sector Generating Sufficient Revenue from Its Resources? The Investment Behavior of Public and Private Firms. The Journal of Private Equity, 19(2), 53–59. JSTOR. https://doi.org/10.2307/44396795

James, M. (2025, February 26). Why Vodafone and Three’s merger is bad news for customers. Times Money Mentor; The Times Money Mentor. https://www.thetimes.com/money-mentor/columns-blogs/vodafone-and-three-merger-uk-means-for-customers

The Guardian. (2024, December 5). Vodafone and Three given approval to merge. The Guardian; The Guardian. https://www.theguardian.com/business/2024/dec/05/vodafone-and-three-given-approval-to-merge

Vodafone. (2025, February 13). New leadership for the merged entity of Vodafone UK & Three UK. Vodafone UK News Centre. https://www.vodafone.co.uk/newscentre/news/new-leadership-team-merged-entity-of-vf-uk-and-3-uk/

Williams, H. (2025, February 4). Vodafone lauds UK growth and lays out £15bn Three merger completion timeline. The Independent. https://www.independent.co.uk/news/business/vodafone-shares-three-uk-growth-sales-b2691787.html