Three Owner Hutchison Whampoa Agrees £10.25bn O2 Takeover

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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O2 takeover by Three’s parent company could create the UK’s largest mobile operator

Hutchison Whampoa, parent company of Three, is set to complete the takeover of rival O2 after agreeing a deal worth up to £10.25 billion with its owner, Spanish-based operator Telefonica.

Telefonica had been looking for a buyer for O2 in order to reduce debts and avoid getting dragged towards the trend of increased convergence in the UK market, in which Sky, TalkTalk, Virgin Media, BT and Vodafone all offer, or plan to offer, various packages of broadband, mobile, landline and television services.

Hutchison will pay £9.25 billion up front and up to £1 billion once the combined cash flow of Three and O2 in the UK reaches a certain threshold. The two parties will now enter a period of “exclusive negotiations” and the takeover is subject to the completion of due diligence.

Three O2 takeover

O2 4GO2 is the UK’s second biggest mobile operator, and when combined with Three’s customer base, could result in the creation of the country’s largest network – making regulatory approval a possible condition of the takeover.

The deal mimics a similar arrangement in Ireland last year, when Hutchison acquired O2 for €780 million to complement its existing Three Ireland network in the country.

Telefonica says the sale of its UK operations will allow it to focus on key markets and afford it greater financial stability, while O2 is confident about its future under new management.

“Subject to agreement as a result of these negotiations and any necessary approvals including merger clearance, this will strengthen our future as a leading, and highly trusted UK communications provider at a time when the demand for mobile connectivity has never been greater,” an O2 spokesperson told TechWeekEurope.

“Three is known for campaigning on behalf of its customers, much like O2.  We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world.”

O2 had been a target for former owner BT, but the company eventually settled for a takeover of EE for £12.5 billion. Sky has also held talks with O2 about launching a Mobile Virtual Network Operator (MVNO) on its network, but it is unclear how the Three takeover would affect such proposals.

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