Telcos prepare to merge

Telecommunications groups Vodafone and Hutchison have made the first steps in preparing for the merger of the two companies, which was announced last month.

The two groups are now designing IT systems and drawing up plans, but these will only be integrated after the merger has been approved by regulators.

“We are independently starting to plan. An inventory, on each side of the fence, is being prepared. It will enable us to understand what systems each company has in place,” a Vodafone spokesperson says.

Hutchison’s seven-year-old network and IT outsourcing agreement with Ericsson has been placed under review, while the two groups say it is likely to pick and choose some systems from both companies.

Ovum research director David Kennedy says that IT systems are an important part of a telecommunications operation and that the two groups are “certainly” looking at this part of their business.

“In the mobile industry, profitability depends on scale. The bigger you are, the more profitable you are, and that’s simply because you’re serving a number of customers with a fixed number of IT management systems,” he says.  

“So in order to generate the profitability they’re hoping for, they’re going to be looking at merging systems or migrating one customer base on to the other’s systems.

“Looking at IT systems will be a key element of that.”

The two companies announced last month that they will enter into a 50:50 joint venture, which will be known as VHA and use the Vodafone brand. Hutchison’s 3 brand will eventually disappear, while all existing 3 customers will come under the Vodafone brand.

The new joint telco will carry six million customers and is expected to record an annual revenue of $4 billion.

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