Three’s £2bn payout to shareholders sparks a row over Vodafone merger

The weekend saw a dispute over a record £2bn payment of dividends to the owners and shareholders of Three, the telecoms company. It was claimed that this huge payout was proof that the company was profiteering.

The Unite union claimed that the dividends paid to the Hong Kong listed conglomerate owned by billionaire Li Ka shing, who owns Three, showed the company was highly profitable and independent. It could continue to be viable even without a merger.

Virgin Media O2, EE/BT, Vodafone/Three and BT/EE will be the main competitors if UK regulators approve the merger.

Hutchison 3G (trading as Three) has more than 4500 employees and 10 million customers in the UK. The dividend payment was made following the £10bn Cellnex sale of mobile phone masts throughout Europe. This included 6,600 UK assets. Cellnex’s agreement was a single transaction in which Three sold the passive infrastructure at its sites, on which they now pay rent.

A spokesperson said that the company had invested heavily in its UK business as well as the deployment of 5G technology for their customers. This is the first payment of dividends by the company.

Unite, however, said that the dividend payment was shown in the latest company accounts months before Three increased certain of its contract price by 14%.

The union claimed that if there were fewer competitors the price increase could have been even greater.

The British company, owned by Li’s CK Hutchison Holdings (95 years old), has been criticized in the past over dividends it took from other UK assets. This includes £2bn worth of dividends received from UK Power Networks, a business that distributes electricity.

The Competition and Markets Authority and the European Commission both blocked the attempted takeover by Three of O2 in 2016, citing the risk that higher prices would be incurred. Both companies tried to calm fears by promising regulators that they would freeze UK consumer prices for five years.

Hutchison 3G pledged to increase investments as part of its most recent merger scheme. This would allow Li cash out from a business that he started 20 years ago.

CMA will likely scrutinise the deal, even though last year, the UK regulator for telecoms, Ofcom, changed their long-held position, saying that they were now open to consolidation in this sector. The CMA had argued previously that reducing to just three networks would harm consumers.

Unite spokesperson Sarah Carpenter said: “Siphoning off record dividends while claiming a ‘failing company’ in order to push through a harmful Vodafone merger, is nothing but cynical exploit.”

The unions are worried that if this merger goes through, it will lead to massive job losses and higher fees.

Carpenter stated that “this deal is a clear assault on consumers. It threatens a shocking £350 increase in mobile bills every year and puts 2,500 jobs at risk, while making hollow investments about the future.”

“Also, the fact that blue light contracts [emergency service] are being awarded to a Chinese company with state influence raises alarming concerns about national security.” Unite remains steadfast in its opposition to this merger and continues to fight to protect the public, workers and consumers.