British telecom giant Vodafone plc (VOD,VOD.L) is in advanced talks with Hutchison Whampoa Ltd.(HUWHF.PK,HUWHY.PK) for a merger of the two companies' Irish telecoms infrastructure, the Financial Times reported Tuesday. The companies are said to have reached agreement on creating a shared grid, though it has not been formally signed.
The move is part of recent attempts by mobile companies to cut costs and improve efficiency amid difficult business conditions in Europe. Hong Kong-based conglomerate Hutchison Whampoa owns the Three mobile brand in Ireland.
According to the FT report, Vodafone and Hutchison Whampoa will create an equal joint venture structure that will own the telecoms equipment, while the spectrum holdings and retail services will be maintained independently by them. The savings for each business from the JV could reportedly exceed 200 million pounds over a period of five years.
Mobile operators are seeking to boost earnings and cut costs through quasi-mergers of basic infrastructure, while their service revenues continue to be negatively impacted by weak economic conditions.
The deal will follow a similar merger of the 18,500 network sites owned by Spanish telecom operator Telefónica SA (TEF, TDE.L) and Vodafone in the UK.
In early June, Vodafone and Telefonica agreed to form a 50/50 joint venture in the UK by combining their mobile phone networks in an effort to expand coverage and provide high-speed mobile internet services amid increasing competition. Both companies' UK divisions would jointly operate and manage a single network grid in the UK that will run two competing mobile internet and voice networks.
Vodafone and Telefonica's European unit, called O2, had set up a joint team called Cornerstone back in March 2009 to share network assets across Europe, including the UK.
Over the past almost two years, Vodafone has sold minority shareholdings in other countries to focus on its main businesses in Europe, India and the U.S.
Hutchison Whampoa's Austrian unit Hutchison 3G Austria said in early February that it has agreed to buy Orange Austria from France Telecom SA (FTE) and private equity firm Mid Partners for an enterprise value of about 1.3 billion euros, or $1.72 billion. The deal combines the third and fourth player in the Austrian mobile telephony market, and is part of the ongoing consolidation in the telecom market in Europe.
VOD closed Tuesday's trading at $28.24, down $0.05 or 0.16 percent on a volume of 5.31 million shares. HUWHY.PK closed trading at $17.63, up $0.28 or 1.61 percent on a volume of 7,669 shares.
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