IRISH MOBILE networks Vodafone and 3 Ireland were keeping quiet yesterday about a possible deal that would see them merge their telecoms infrastructure.
Reports claimed the two were close to agreement on a joint venture, the latest industry tie-up designed to save costs and boost coverage.
Sources, who asked not to be named, said nothing had yet been signed between Vodafone and Hutchison Whampoa, the Hong Kong-based conglomerate that operates the 3 mobile brand in Ireland. Both companies declined to comment on the reports yesterday.
If the deal goes ahead, the merger will create a 50-50 joint venture that would result in the biggest network in Ireland while producing “significant” cost savings, one of the sources said.
Although the source did not elaborate on the expected savings from the deal, the Financial Times said each of the businesses could save more than £200 million over a five-year period.
“It’s a smart move to initiate savings while having a high probability of receiving the green light from regulators,” said Vincent Maulay, an analyst at Oddo and Cie in Paris. Vodafone’s Irish unit may be able to cut operating costs by 10 per cent through the infrastructure merger, he said.
In Ireland, Vodafone and 3 would put the telecoms infrastructure into the joint venture but maintain their independent spectrum and retail services. Both companies also compete with O2 and Meteor Mobile, owned by the Eircom Group.
The talks follow a spate of similar deals across Europe where operators are looking for ways to upgrade their networks at a time when customers are cutting back on spending.
In Britain, Vodafone announced a deal last month to share a network with Telefonica’s O2 to help cut the cost of building a new, faster service.
France Telecom merged its Orange network in the UK with Deutsche Telekom’s T-Mobile in 2010, creating Everything Everywhere, in a bid to save more than €4 billion in network, marketing and administrative costs by 2014.
The average European operator will spend about €2 billion to upgrade an existing network to fourth-generation technology to cover 75 per cent of a country with 50 million people, according to researcher Idate.
“Such an agreement would have the potential to significantly improve network quality, speed to market with 4G, lead to much better cash generation and enhance returns on capital in the Irish market for both companies,” analysts at Espirito Santo said, in reference to upgraded fourth generation networks.
"The potential for a JV in Ireland are fully in line with our view that Vodafone will emerge as the pre-eminent network operator in Europe. Vodafone seems to be working on a market-by-market basis and is not necessarily tying itself to one partner." – (Bloomberg, Reuters)
