Government reaches agreement with Vodafone over national security concerns
The Government has struck a deal with Vodafone to address national security worries linked to a stake in the company by a telecoms group backed by the United Arab Emirates.
Now "proportionate measures" will now be implemented at the London-based telecoms firm to alleviate concerns and allow it to appoint a director from the investors on its board.
Deputy Prime Minister Oliver Dowden has said that there were national security risks associated with Emirates Telecommunications Group, trading as Etisalat by e&, owning nearly 15% of Vodafone. An order warned that e&'s relationship with the British firm could "enable it materially to influence the policy of Vodafone" and called for a "national security committee" to be established by the business to supervise and monitor any sensitive work.
The Cabinet Office confirmed it had approved a new "strategic relationship agreement between Vodafone and e&". It stated: "Using the National Security & Investment Act it has put in place proportionate measures to address any potential national security concern", adding that they would work with investment partners to minimise any risk where investment might impact the UK's national security such as through the acquisition of certain technologies or infrastructure.
"As part of our critical national infrastructure, telecoms is one such sector. Vodafone is also a particularly important company for the UK Government given its critical functions, including as a key partner in HMG's cyber security strategy." A spokesperson for Vodafone said: "We are pleased to have received clearance in our home market for our strategic relationship agreement with e& and for e& to take a seat on our board."
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Abu Dhabi-listed e& has built up a stake of 14.6% in Vodafone, marking a deepening of a strategic tie-up that began in May 2022 when e& first invested in the FTSE 100 giant. The British telephone firm announced in May that e& chief executive Hatem Dowidar would join the Vodafone board as a non-executive director.
The UK's competition watchdog confirmed the proposed merger between Vodafone and fellow mobile network Three is to be formally investigated. The Competition and Markets Authority (CMA) said it had started the formal investigation to examine whether it could lead to a substantial lessening of competition for mobile consumers by merging the two firms into a single network provider.
The CMA said if it found reason for concern during its initial examination, it could launch a more in-depth investigation into the merger. The £15 billion merger was first announced last summer and would create the UK's largest mobile phone network.The big merger between two major UK mobile networks might get looked at by the people in charge of making sure companies play fair.
"This deal would bring together two of the major players in the UK telecommunications market, which is critical to millions of everyday customers, businesses and the wider economy," said Sarah Cardell from the CMA. "The CMA will assess how this tie-up between rival networks could impact competition before deciding next steps."
Vodafone's boss Ahmed Essam shared: "We have formally submitted our merger notice to the CMA, having worked with them closely through the pre-notification process. We look forward to continuing the constructive conversations now that the formal process has begun."
"We strongly believe that the proposed merger of Vodafone and Three will significantly enhance competition by creating a combined business with more resources to invest in infrastructure to better compete with the two larger converged players. Our commitment to invest £11 billion will build capacity to meet the exponential growth in demand for data and accelerate the rollout of advanced 5G across the UK, delivering benefits to consumers and businesses throughout the nation."
Robert Finnegan, Three UK's top man, stated: "By combining networks, Three UK and Vodafone UK will unlock £11 billion of investment that will help the UK close the 5G gap with leading European countries and realise its ambitions to be a front-runner in digital connectivity. Thanks to this transaction, 95% of the population and every school and hospital will be covered by standalone 5G by the end of the decade."
"Joining forces will also yield more immediate benefits. From day one, our customers will enjoy faster, more reliable coverage over more of the country and without paying a penny extra. We are confident that this transaction will deliver significant benefits to our customers, the country and competition, and we look forward to working closely with the CMA as they review our notification."
* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]
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