From the newsletter (sign-up if you want it sooner): Vodafone’s full £4.3bn takeover of VodafoneThree in the UK and AT&T’s $23bn deal for EchoStar spectrum in the US signal telco industry consolidation, renewed investment, and strategic positioning – also covering Starlink and T-Mobile – for the AI era.
A bit of a hodge-podge today, I’m afraid. But here’s a brief round-up of what’s happening – in terms of top-line news (worth reviewing) and bottom-line reporting (worth digesting). The main headlines, then, plus some thoughts about the telco market. First, Vodafone has completed its £4.3bn cash buyout of CK Hutchison’s 49% stake in VodafoneThree in the UK. Regulatory approval was on time, “as expected”, and leaves the UK-headquartered group in full charge of its JV operation in its home market, giving it greater control of execution, rollout, and investment strategy. It is now the biggest single operator in the UK, which officially goes from four operators to three.
Which seems to be the optimal operator-count for a big European market. (See also France.) The deal was always on the cards; it is a takeover that masqueraded – in June 2023 when the JV was agreed, and May 2025 when it was passed – as a merger, and probably a smart tactic to get its ultimate goal over the line. But it has come sooner than anyone expected (including just six weeks to pass regulatory muster), and Vodafone has been roundly applauded for making the project with Three work. Margherita Della Valle, chief executive at Vodafone Group, said: “We’ll have the ability to move faster in the next phase of building one of Europe’s leading networks.”
The reference, here, is to the pace of its £11bn plan to upgrade its UK networks, as a part of the 2023 JV deal. It will save £700m per year in op-ex and cap-ex by the end of March 2030 (FY30), it said – meaning, in simple terms, that the deal could pay for itself through synergies around 2036. The transaction will increase its leverage by around 0.4 times annual EBITDAaL – per its guidance. An update is due after the summer (October), but Vodafone said its “multi-brand strategy” will “remain unchanged”. RCR was unfair yesterday (of course) to say Orange was the one with serious strategic M&A activity – although, for the quarter, it recorded the most (and most expansive) deals.
And the sense is this is the key move for Vodafone to get its (big) house in order, to prep for what comes next with late 5G and early 6G, and the task to connect and monetize the AI economy.
The other big telco news, actually from Tuesday, is that AT&T has closed its $23bn deal for 30 MHz of 3.45 GHz and 20 MHz of 600 MHz spectrum from EchoStar. (Which marks out the telco money pit – $23bn for a chunk of low/mid-band spectrum, versus £4.3bn for half a tier-one carrier, even with currency and footprint conversions.) EchoStar/Dish is now dead, prepping for bankruptcy, putting paid to US ideas about a four-player 5G game; Starlink has taken $17bn of AWS-4 and H-block licenses, plus $2.6bn of AWS-3 off its hands besides. AT&T is buying scale too, of course – as well as speed (not waiting for future FCC auctions; which now on the cards too, incidentally).
The mid-band block is the prize, complementing its C-band/3.45GHz holdings – as it pursues T-Mobile in the urban 5G market. The low-band block improves rural coverage and indoor penetration – and, it might be suggested, works as a pre-emptive riposte to Starlink’s rangey satellite ambitions. Just as a note on Starlink, RCR gets daily equity research notes from BNP Paribas, which are always good. Writing today (July 30), it cites an article (paywalled) that links a 2-3% drop (over an unspecified timeframe) in incumbent-telco stocks to feverish talk about SpaceX/Starlink’s plans to build a terrestrial network, and concludes there’s nothing doing – unless SpaceX buys T-Mobile.
It writes: “T-Mobile shares finished down less then SpaceX, while AT&T/Verizon closed down 2-3%. This makes sense to us. SpaceX has a poor hand to play in wireless (and doesn’t have a clear vision to progress and grow); its ability to acquire spectrum for a competitive network through the C-band auction is a non-starter. A national network on the spectrum it bought from EchoStar would require 50k-70k sites [to have] a shot at being on par with the big three. A nationwide network on the C-band spectrum it could buy next year would take 120k sites, if not more. Excluding spectrum, this could easily cost $100bn. The only route… is through M&A. T-Mobile would be the clear target.”
Ah, we are out of time. That’s what everyone else is talking about, anyway; maybe tomorrow we will look at some deeper market shifts.
