Subscribe For Free

Vodafone and Three merger- analysis from James Gray

Megan Robinson
October 4, 2022

The two companies are set to merge because each network cannot solely recover the cost of setting up 5G networks

Vodafone and Three have recently announced that a potential merger could go ahead as soon as the end of this year.

Managing director of consultancy firm Graystone Strategy, James Gray, has given his thoughts on what the joint venture could mean for consumers and the companies involved.

Why a joint venture?

They are largely complementary; Vodafone is more premium than Three and has a strong enterprise base compared to Three’s limited enterprise base. Three has a more youthful brand than Vodafone and it appeals to younger data hungry consumers who are less likely to be found on the Vodafone base.

Spectrum is the lifeblood of telecoms and Three has a big holding for a relatively small base. That will be very appealing to Vodafone because the more spectrum you have the faster the 5G service you can supply. Three has big blocks of contiguous spectrum, which would really enhance the mobile data experience for customers of a merged entity.

Both entities have been building and demonstrating enterprise private networks (a big growth area), so additional spectrum means they can hive off some private networks for large corporate customers.

Economies of scale: both companies can optimise their equipment, their sites and drive economies of scale, efficiencies and potentially improve services for customers. 5G investment is significant so running one network where previously you would have run two brings huge savings and efficiencies on kit, rent, servicing and people.


If approved, impact will be limited initially. However, there is a risk that consumers find there is less competition over time. It all rests on the virtual operator partnerships being maintained, and how much effort is put into providing a better network experience and passing on savings.

To put this into context, Three was always a challenger brand – the first to offer unlimited data, always focused on value, delivering far more GB for less. Vodafone is not and will want to curb the average revenue per user (ARPU) decline. In the medium term, I would expect Three customers to get less value after the deal.

This might prompt the base to look elsewhere. However, commercially that won’t be a loss to the new joint venture. Both networks have an extensive MVNO portfolio including ID Mobile, Asda Mobile, Lebara, Gamma, and there will still be the sub brands of TalkMobile, VOXI, SMARTY offering better value SIM only deals, so there will still be revenue to be had from the price focused brands that consumers could switch to.

Long story short, if the wholesale / MVNO market is sustained, consumers will still have choice and there will still be challengers in the market. 

Share this article