Vodafone is in talks to combine with its UK telecommunications rival Three.
According to The Financial Times, the third and fourth largest mobile network operators have been in contact about a possible joint venture agreement.
The news comes as Vodafone reportedly faces pressure from its investor Cevian Capital to ‘simplify its business’ and seek deals in national markets to ‘improve returns’.
While Vodafone’s share price has increased by 3% this year, the telecoms group has lost 44% of its value in the last five years.
On the other hand, CK Hutchinson-owned company Three has recently reported flat ‘quarter-on-quarter’ revenues of £582 million despite having aims to double its size in the last few years.
READ MORE: Three suspends sponsorship with Chelsea FC
The exact terms of the merger have not been discovered, but Vodafone chief executive Nick Read has consistently mentioned his ambitions to reduce the group’s debt by seeking out combination deals as opposed to outright purchases.
Analysts at Enders Analysis noted earlier this year that Vodafone’s “lack of funding capacity” meant that it would likely look to “form a joint venture with the potential to contribute additional debt or receive cash equalisation payments to assist with leverage reduction”.
Talks between the two domestic rival network companies were held last year but no deal was finalised.
According to FT, telecommunication executives are positive that regulators have gained increased awareness of the need to invest in network infrastructure, and therefore will be more accepting of mergers.
Any doubt as to how regulators might react to join venture deals arose in 2016, when the European Commission blocked a proposed merger between O2 and Three.
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