Vodafone has confirmed it is in talks with Three about a potential merger of the two companies.

The telecoms company said that the transaction would involve combining their UK businesses, with Vodafone owning 51 per cent and Three-owner CK Hutchison owning 49 per cent.

Vodafone says operators in the UK lack the scale needed to speed up the rollout of full 5G and expand broadband connectivity to rural communities and small businesses.

The company claims that the merger would allow them to meet the government's 5G ambitions.

Any merger between the two businesses would need to be approved by the Competition and Markets Authority (CMA).

The news comes a month after a report by the Digital Connectivity Forum found that the UK is at risk of failing to take advantage of the full benefits of 5G.

Last year, the CMA gave the go-ahead for a merger between Virgin Media and O2.

The UK watchdog said that it had been clear from the outset that it was not concerned about overlapping retail services like mobile, because of the small size of Virgin Mobile. Instead, the investigation focused on whether the partnership could lead to reduced competition in wholesale services.

After examining the evidence, the CMA’s inquiry group concluded that the deal was unlikely to lead to any substantial lessening of competition because backhaul costs are only a relatively small element of rival mobile companies’ overall costs.

The regulator said that there were other players in the market offering the same leased-line services like BT Openreach and that there are several companies that provide mobile networks for telecoms companies, which meant O2 is forced to keep its service competitive.

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