Vodafone and Virgin Media O2 announce long-term network-sharing agreement

A key reason given by leading UK mobile operators Vodafone and Three UK for their prospective merger was to create a much-needed alternative to the other two, much larger, providers and increase real competition in the UK comms market, and now Vodafone has agreed to extend and enhance its decade-long existing mobile network-sharing agreement with Virgin Media O2 (VMO2) to bolster quality mobile coverage across the country and deliver improved services for customers.

The potential merger between Three UK and Vodafone was first announced in June 2023, seeing the operators’ parent companies, Vodafone Group and CK Hutchison Group Telecom (CKHGT), enter into binding agreements to combine their UK telecoms assets, in which Vodafone would own 51% of the combined entity under the working title of MergeCo, and CKHGT would own 49%, with the aim of enhancing competition in the retail and wholesale mobile markets.

Subject to the merger’s approval by the UK Competition and Markets Authority (CMA), which is currently undertaking a review of the deal, the agreement is designed to provide a stable basis for MergeCo’s enlarged network to participate in the network-sharing agreement and Virgin Media O2 will acquire spectrum from MergeCo.

Many elements of the agreement expand on the existing arrangement between Vodafone UK and Virgin Media O2 – recently seen in the extension of the Shared Rural Network in so-called hard-to-reach areas of the UK – and are independent of the Vodafone UK and Three UK merger outcome. However, subject to the completion of the merger, the operators have agreed that Virgin Media O2 will acquire spectrum from the newly created MergeCo, establishing three scaled mobile network operators, each having better alignment of spectrum holding.

VMO2 and Vodafone said it will reduce the current imbalances in spectrum holding between the UK’s mobile network operators, which will enhance competition in the mobile market, allowing MergeCo and VMO2 to provide increased capacity, speeds and greater coverage for customers.

Through a combination of MergeCo’s prospective £11bn commitment and Virgin Media O2’s £2bn annual investment in its networks and services, the companies said the agreement will ensure quality mobile connectivity, choice and enhanced competition. The firms claimed this would not only benefit their respective customers, but also businesses, which includes mobile virtual network operators (MVNOs) – such as Sky Mobile, Lebara and Lyca Mobile – which make use of networks via wholesale partnerships to deliver their own mobile services to millions of people across the country.

The agreement is seen by the operators as ensuring these virtual operators have access to a choice of three high-quality, scaled wholesale competitors, further supporting an already thriving MVNO segment in the UK.

“With this agreement and our merger with Three, we will transform the mobile experience for over 50 million customers in the UK for the long term, providing significant network improvements including more choice, better quality and greater coverage across the country. These benefits extend to both retail and wholesale MVNO customers,” said Ahmed Essam, CEO of European Markets at Vodafone. “The proposed merger, together with this agreement, will boost competition by establishing a strong third player in the UK mobile market and will improve the balance of spectrum holdings, levelling the playing field between the UK’s mobile operators.”

VMO2 CEO Lutz Schüler added: “This new agreement with Vodafone ensures that quality mobile network choice, performance, coverage and competition is enhanced to the benefit of millions of consumers, businesses and our mobile operator partners across the country. We are extending and bolstering elements of our existing network sharing arrangement, while also ensuring there is a robust, balanced and functional structure in place for the long term should Vodafone and Three’s proposed merger gain consent. We believe that this new agreement addresses the issues we have voiced, and the CMA outlined in its initial decision, and will now continue our engagement with the regulator in this spirit.”

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