Monday, June 24, 2024

    EDITORIAL A global change: unpacking the true impact of the Vodafone and Three UK merger

    The proposed mega-merger of Vodafone UK and Three UK to form what would be the UK’s largest MNO is potentially a ground breaking event in global telecoms. While it will create the largest MNO in the UK, just, but it has much more far-reaching impact than that. To paraphrase Victorian poet Elizabeth Barrett Browning, let me count the ways.

    For consumers

    First off, consumers and businesses will see enormous benefits from the scale of the organisation. It will offer not only unrivalled coverage in the UK, but will position the new merged company to invest in rolling out 5G as the standard across the UK. This, in turn, will force the other two major MNOs – Virgin Media O2 and current market leader BT EE – to do the same.

    Secondly, this will lead to a massive boost for the UK economy. The UK Prime Minister Rishi Sunak told London Technology Week this week that the country is making strides to being a technology superpower. This won’t happen without ubiquitous, super-fast networks. This deal could hasten this.

    Talking to Vodafone this week, Telemedia News has learned that the real benefit will be in creating a company that can afford to make this happen. Vodafone told us: “Vodafone UK and Three UK are currently sub-scale, with only around 20% and 10% share of the mobile market by subscriber, respectively. This makes both companies unable to recover their cost of capital – as Ofcom found in its future approach to mobile markets and spectrum review, both companies have Return on Capital Employed of 1-2% and limits their ability to continue to invest. After completion, MergeCo will have the necessary scale and a great platform to invest, grow and compete.”

    Vodafone goes on to point out that the deal will add a whole raft of benefits to the telecoms sector too, saying: “We will be better able to compete for all customers driving further network, retail mobile and fixed broadband competition in the UK, including the ability to make converged offers in competition with the two largest operators BT EE and Virgin Media O2. The continuing network sharing agreement with Virgin Media O2 means that its customers will also enjoy network improvements from this transaction, providing an additional boost to competition in relation to market leader BT EE.”

    There will also be benefits for the wholesale market too, with Vodafone telling us: “With the scale and better quality provided by MergeCo’s combined network, the UK’s MVNOs will gain better choice for wholesale partnerships, keeping fierce price competition at the retail level. MVNOs are the fastest growing part and a major competitive force in the retail market representing around 16.5%13 of mobile subscribers. Approximately 90% of MVNO customers are currently on BT EE or Virgin Media-O2 networks.”

    For the country

    This boon for consumers and the wider telecoms industry has a halo effect on the wider UK economy too – which is perhaps what everyone outside the UK can take away from the deal. According to Vodafone, MergeCo intends to invest over £6 billion in the first five years, and £11 billion over a 10 year plan, to create a best-in-class 5G network. This level of infrastructure investment would be expected to support between 8,000 and 12,000 new jobs in the wider economy.

    The company says: “Through the new combined business, MergeCo will deploy one of Europe’s most comprehensive and advanced standalone 5G networks, powering the UK’s digital economy and underpinning the UK’s role as a digital tech leader in Europe. By having a better 5G network in place sooner, MergeCo is expected to deliver up to £5 billion per year in UK economic benefit by 2030, supporting the digital transformation for schools, hospitals and businesses. MergeCo’s standalone 5G network will cover every school and hospital in the UK by 2030, helping deliver the Government’s stretch ambition as set out in the Wireless Infrastructure Strategy.”

    Sharad Sharma, Vice President Head of Infrastructure Business at NTT DATA UK&I, agrees, telling us this week that: “With the potential merger of Three and Vodafone, the joint company will have access to a large spectrum asset. This will enable this joint venture to take some technologically advanced initiatives around 5G and later 6G, putting the UK at the forefront of tech innovation.

    “Moreover, with the joined-up might of two large organisations we expect to see the expedited rollout of 5G networks and broadband to rural areas. Vital services will benefit from faster connectivity – enabling faster response times, better patient care, and more reliable service all across the public sector in underserved areas.”

    Sharma adds: “No-one should be left behind. And with a merger this size, the UK telecoms industry is showing that it’s serious, that it means business, and that no provider can drag their heels in the campaign for universal connectivity.

    “To encourage growth across all elements of the economy and to build Society 5.0, everyone from individuals to small business owners to mid-large enterprises must have access to 4G and 5G networks. For the UK to be a leader in the advent of 5G technologies, we must act like one. To the benefit of communities, businesses, and – most importantly – people.”

    For telemedia and the world

    But it offers the industry much more than that; it could kick start an investment spree in UK telecoms, making the UK a leader in 5G, rapidly accelerate MNO-operated CPaaS and push AI and chatbot tech even harder.

    Such a powerful MNO with the ability to invest in 5G – and the impact that will have on the two other major players investing in 5G – is set to see the kinds of services that can be offered over these networks rapidly accelerate. Already, many businesses are buying their advanced, multi-channel comms in as a service, with CPaaS leading the way. This is set to evolve into the wider deployment of AI within networks, again offered as a service, and MNOs would be foolish not to embrace this.

    Chatbots are already playing a significant role in ecommerce, with data showing that $12bn will be spent through them this year alone. That could hit $72bn by 2027. Conversational AI is going to be big business, especially as a B2B offering and getting in on the ground floor with network-run bots as a service could be one of the real winners with 5G for MNOs and the merger could place the new combined telco at the forefront of this.

    But these are uncertain times. While AI offers the moon on a stick, it is all predicated on understanding customer data – and with the cost-of-living crisis shifting consumer habits, many marketers are seeing the data they have and the assumption they make, starting to have less value. Could the consolidation within UK mobile networks herald a new world order of mega-telcos, which have the scale and finances to create not only ubiquitous 5G – and eventually 6,7 and 8G – networks that deliver not only true super-fast mobile broadband everywhere, but the AI and AI-backed services that the world is soon going to depend upon?

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