O2 CEO Ronan Dunne is reportedly approached by private equity firms about takeover, but Telefonica could stay put or find another buyer
O2 CEO Ronan Dunne could lead a management buyout of the company after CK Hutchison was prevented from buying Telefonica’s UK operations and merging it with Three.
The European Commission (EC) blocked the takeover because of fears it would damage competition in the retail and wholesale mobile markets in the UK.
According to the Daily Telegraph, Dunne has had preliminary discussions with a number of private equity companies for a leveraged buyout that would be the largest to take place in the UK since the financial crisis.
O2 management buyout
The value of the transaction has been estimated at £8.5 billion – less than the £10.25 billion Hutchison was prepared to pay. This, the paper says, is because of the estimated cost savings that would have resulted from the blocked merger.
A management buyout is one of many touted options for Telefonica, which had been keen to exit the UK market. In any case, TechWeekEurope understands Hutchison and Telefonica are under contract until the end of June.
Virgin Media’s parent Liberty Global is a potential suitor, with CEO Mike Fries refusing to rule out the possibility last week. However it is unlikely Sky will make a move as it has no intention of acquiring mobile infrastructure and has a mobile virtual network operator (MVNO) agreement with O2 anyway
Another option could be that Telefonica will stay put for the time being because of improved fortunes of both the wider group and O2 in the UK. It could choose to list O2 on the stock exchange to reduce its debt.
Three’s future is less clear. CK Hutchison has said it could appeal the decision but it has also been linked with a takeover of TalkTalk to help it better compete with the likes of Vodafone, Sky, Virgin Media and BT in an increasingly converging communications market.