Long-predicted consolidation is becoming a reality in the UK mobile market after Vodafone and O2 announced a major network pooling deal. The fierce rivals have struck an unlikely partnership to save the firms 'hundreds of millions of pounds'. The firms serve 549 million customers worldwide and will now compete on services and price rather than coverage and call-quality. Mobile operators have not been immune to the recession - Vodafone recently announced a £1bn cost-saving drive because of market conditions.
The media reaction?
Although not a full merger, The Times said: 'Consolidation has long looked inevitable in the UK.' O2 owner Telefonica admitted 'the current economic situation was a catalyst'. Both firms said the deal would benefit customers and shareholders, but The Guardian said it was 'unlikely to lead to cheaper calls and internet services'.
Who are the PR players?
At Vodafone Matthew Kirk has recently been promoted to director of external affairs after the departure of Simon Lewis at the end of February. Vodafone continues to use Finsbury for financial PR and Telefonica uses Maitland for the O2 brand.
What happens next?
The deal will be placed under the microscope by competition authorities in the UK, Ireland, Spain and Germany. The firms, which deny there are competition issues, will be extremely keen to push the deal through and realise the projected cost-savings. It is also unlikely to be the last link-up in the sector - T-Mobile already shares infrastructure with 3 and Vodafone already has a network-sharing agreement with Orange. The next step could be full-scale mergers.
500 - Job cuts for Vodafone last month to reduce costs.