By Jess Jones
Vodafone and Three UK have dismissed concerns about their merger threatening national security after facing criticism from MPs and trade bodies over Three’s ties to China.
Three UK, owned entirely by Hong Kong-based CK Hutchinson Holdings, has provoked MPs and trade bodies to flag their concerns that the telecoms company’s links to China may endanger national security.
Commenting on the news, Vodafone told City A.M. they “don’t believe there should be any security concerns about this merger”.
“Like any similar transaction we’ll need National Security and Investment Act approval”, the telecoms giant said, adding that both the businesses “have worked closely with UK government to ensure their networks have the highest levels of security”.
Three declined City A.M.‘s request for comment but the firm’s UK boss Robert Finnegan previously told The Times he did not see “any concerns at all” as the telecoms company already has operations in the UK.
“It’s a regulated industry and we work very closely with the national security bureaus across the country”, he added.
CK Hutchinson did not respond to City A.M.‘s request for comment.
The controversial deal, worth approximately £15bn, was announced two weeks ago, and if successful, would make the combined entity, named MergeCo, the largest network provider in the UK, potentially surpassing EE.
Under the agreement, CK Hutchinson would own a 49 per cent stake in MergeCo, while Vodafone would hold the majority stake.
It is anticipated that Vodafone would acquire the remaining stakes three years after the deal’s completion, subject to MergeCo’s value reaching £16.5bn.
MPs David Davis and Apsana Begum (Conservative and Labour representatives, respectively) have raised concerns about the “potential security implications” of the merger.
Former Tory leader Sir Iain Duncan Smith has urged the government to scrutinise the deal closely. Earlier this month he said Three’s connection to China is “one of the big worries”.
Vodafone boss Margherita Della Valle has said the deal would be “great for customers, great for the country and great for competition”.
However, UK trade union Unite were quick to blast the merger on grounds that it could jeopardise national security.
According to Gail Cartmail, head of operations at Unite, the merger will “give a company with deep ties to the Chinese state an even more prominent place at the heart of the UK’s telecommunications infrastructure”.
Cartmail added the deal would raise phone bills and lead to job cuts at both companies. He called on the government to prevent the “reckless merger” and revealed Unite is forming a cross-party coalition to support this demand.
Vodafone say the merger will come at no extra cost to customers.
While the Cabinet office declined to comment on specific mergers, they informed The Times of their “robust powers” to block or impose remedies on transactions that pose a national security risk.
Currently, Britain’s competition watchdog is investigating the proposed merger.
