Telecoms giants close to link-up in Ireland

The sources, who asked not to be named because the talks were not public, said nothing had yet been signed between Vodafone and Hutchison Whampoa, the Hong Kong-based conglomerate that operates the 3 mobile brand in Ireland.

The merger will create a 50-50 joint venture that would result in the biggest network in Ireland while producing “significant” cost savings, one of the sources said without elaborating on the size of the savings.

The Financial Times said the savings for each business could exceed £200m over a five-year period.

The talks follow a spate of similar deals across Europe where operators are looking for ways to upgrade their networks at a time when customers are cutting back on spending.

Vodafone announced a deal last month to share a network in Britain with Telefonica’s O2 to help cut the cost of building a new superfast service.

In Ireland, Vodafone and 3 would put the telecoms infrastructure into the joint venture but maintain their independent spectrum and retail services.

Both companies, which declined to comment, also compete with O2 and Meteor Mobile, owned by the Eircom Group.

“Such an agreement would have the potential to significantly improve network quality, speed to market with 4G, lead to much better cash generation and enhance returns on capital in the Irish market for both companies,” analysts at Espirito Santo said, in reference to upgraded fourth generation networks.

“For example, it would be reasonable to expect cuts to consensus capex/sales forecasts in the 1-2 percentage points range from 2013 onwards.

“Deals such as the recent agreement with Telefonica in the UK and the potential for a JV in Ireland are fully in line with our view that Vodafone will emerge as the pre-eminent network operator in Europe.

“Vodafone seems to be working on a market by market basis and is not necessarily tying itself to one partner.”