The company that owns mobile network Three could soon be the owner of rival O2 as well, with a fresh report suggesting a industry-rattling purchase could be imminent.
Hutchison Whampoa, the Hong Kong-headquartered investment holding company that is controlled by tycoon Li Ka-shing and owns UK network Three is mulling over a £9 billion takeover of O2, according to a report in the Sunday Times, which cites unnamed "city sources".
The enormous firm is said to be in the early stages of talks with Telefonica, the Spanish telecoms company that bought O2 for a shade under £18 billion back in 2005. Telefonica has reportedly enlisted an investment bank to help weigh up its options in terms of selling O2, which claims to have over 23 million customers in the UK. We've asked Telefonica and Three for comment, and will update this story if we hear anything back.
"Telefonica's owner O2 is keen to sell to pay down debt and focus on its struggling Spanish home market," said Kester Mann, analyst at CCS Insight. "Having seemingly lost out to EE in the sale to BT, it may not hold significant bargaining power."
"O2's owners need cash," John Delaney, mobile analyst at IDC added. "They've still got a very large debt that they need to think about clearing, and one of the ways of doing that is selling assets."
BT buyout ramifications
The report suggests that the mooted takeover may have been triggered by BT's recent decision to. BT had been earlier instead, but that deal never materialised. Now, according to an anonymous industry sources quoted by the Sunday Times, "Everyone is talking to everyone."
One thorny issue should Hutchinson Whampoa decide to buy O2 could be untangling Three's network-sharing deals with EE. O2in place with Vodafone.
Another obstacle could be swinging the buyout with regulatory bodies. "Any deal would create a new market leader in the UK with more mobile subscribers than EE," Mann said. "However, it would also be subject to significant regulatory scrutiny, as it would reduce the number of mobile operators from four to three.
"Evidence in markets like Austria suggest that mobile prices rise following a move from four operators to three. This is something that will concern competition authorities in the UK."
An O2 buyout could be the latest stage in a series of expansion moves for the Three brand. "Three has already been expanding in Europe having completed recent deals in Ireland and Austria," Mann noted. "Indeed, in Ireland it purchased O2. The company is also understood to have been talking to Wind in Italy. Should it complete further deals it would be well on the way to establishing itself as a major European operator."