Vodafone (VOD) has announced it will merge with mobile UK mobile operator Three, a “game changer” for the UK market, according to the telco’s boss.
Vodafone UK will own 51 per cent of the business while Three’s owner CK Hutchison Group (HK:0001) will own the remaining 49 per cent.
This deal will make it one of the three largest mobile operators in the UK and the hope is the increased scale will improve profitability. Vodafone says it plans to invest £11bn into 5G in the UK over the next ten years and plans to increase customer data speeds six-fold by 2034.
Telecoms companies have struggled to grow in recent years because of the huge capital investment needed and the relative competition in the industry but by reducing competition this deal should improve the return on invested capital.
“Three UK and Vodafone UK currently lack the necessary scale on their own to earn their cost of capital,” said Canning Fok, the co-managing director of CK Hutchison. “This has long been a challenge for Three UK's ability to invest and compete.”
Earlier this week, Clive Beagles, fund manager of JOHCM UK Equity Income Fund (GB00B95FCK64), told the Investors’ Chronicle that he liked Vodafone’s prospects as long as the regulators didn’t block consolidation in the industry. “Most mobile operators are not making a high return on capital employed because there are too many operators. The industry has shown structural growth, but needs to make a lot of capital expenditure,” he said. AS
Read more: Vodafone’s new chief must tackle the ‘complexity’ problem
Entain shares fall on Polish acquisition
Entain (ENT) shares plunged by 10 per cent as investors questioned the sports-betting and gaming company’s £750mn acquisition of leading Polish gambling operator STS, which was revealed after market close yesterday. Net cash due for the purchase, which is through Entain’s CEE joint venture and values STS at 11 times forward cash profits, is £450mn. This will be funded by the £600mn raised by Entain through a share placing and retail offer at 1,230p per share. The company forecasts £10mn of synergies from the deal.
Peel Hunt analysts argued that the company was “right to pay up to achieve market leadership, acquiring both growth and diversification”. CA
Read more: Should you take a stake in the gambling sector?
Games Workshop expects strong revenue growth
Games Workshop (GAW) unveiled some bullish guidance ahead of full-year results expected on 25 July. The miniature maker said that core revenues for the year to 28 May would be at least 14 per cent ahead of the £440mn posted in 2022, while it expects pre-tax profits to rise by not less than 8 per cent.
Investors are keenly awaiting more details of film and television productions set in the world of Warhammer, after the company’s agreement in principle with Amazon (US:AMZN) last December. The shares rose by over 4 per cent in early trading. CA
Read more: Games Workshop sheds its fantasy valuation
Castings declares special dividend
Castings (CGS), the West Midlands-based iron castings and machining company, has announced a special dividend following a strong bounce-back in truckmaker demand. As well as hiking the ordinary dividend up by 7 per cent to 17.35p per share, directors have recommended a supplementary payout of 15p per share.
The group faced “very significant” price increases in raw materials and energy in the year to 31 March 2023. However, it still managed to grow its profit before tax by 38 per cent to £16.7mn. JS
