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Mobile Operator Three UK Hints Towards Interest in O2 Acquisition

Friday, December 6th, 2013 (8:13 am) - Score 2,797
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The boss of mobile operator Three UK, David Dyson, has added fuel to the growing fire of rumours that surround their alleged interest in a merger with O2 by saying that “under the right circumstances” the United Kingdom could operate competitively with fewer operators. But there are significant complications to consider.

So far it’s not been a great year for O2 UK, which has had to sell their fixed line home broadband and phone business to BSkyB (Sky Broadband) and re-focus on the expensive roll-out of 4G (LTE) based Mobile Broadband services. Meanwhile O2’s parent company, Telefonica, is still struggling to deal with debt and last month CCS Insight predicted that it might tackle this by taking advantage of “favourable regulatory conditions” in the EU to sell its UK mobile business.

At the same time Three’s European operations, which have the backing of a powerful Chinese conglomerate in the form of Hutchison Whampoa, have been throwing money around like there’s no tomorrow in an effort to boost growth by acquiring O2 Ireland and Orange in Austria. Three UK alone might not have enough cash to grab a prize as big as O2 (they’re roughly a quarter of the size) but that’s clearly less of a concern for Three’s parent.

David Dyson, CEO of Three UK, said (The Guardian):

We are three years into a five-year plan to double our customer base from five million to 10 million. If we can deliver on that plan maybe that makes us more interesting as a target or puts us in a position where we can do something as an acquirer.”

Dyson, whom originally opposed the T-Mobile and Orange (now EE) merger and has always argued alongside Ofcom for a market that supports at least four primary operators, seems to be changing his tune. But he also admitted to keeping a close eye on a similar situation in Germany where Telefonica’s O2 brand is seeking permission to merge with E-Plus and thus reduce the number of primary Mobile Network Operator’s from four to three.

However EU regulation would not be the only hurdle for such a merger and indeed there are some complicated network sharing arrangements to consider. At present Three UK have a 50/50 network sharing deal through the umbrella organisation Mobile-Broadband Network Limited (MBNL). Meanwhile O2 and Vodafone have a similar arrangement and the complications of bridging those two deals would be no small task.

The issue of spectrum ownership could also become a problem with both Three UK and O2 already owning a good slice of 2100MHz and smaller slices of 1800MHz and 800MHz. The end result of any merger would turn Vodafone into the markets smallest operator and they might not be happy about that.

Leave a Comment
7 Responses
  1. Avatar kds

    if three buy O2 and make it as current three then have to live without a mobile.

    Any thing upsetting Vodafone is a good thing but I would like more mobile companies not less

  2. Avatar sam

    three and o2 merging would result in higher prices.

  3. Avatar Matthew Williams

    Not sure where you got information that O2 owns any 2.6GHz because it is complete lies. The only spectrum that O2 owns that Three owns no spectrum in is 900MHz

    Combined Together they would own
    2x15MHz of 800MHz
    2×17.4MHz of 900MHz
    2×20.8MHz of 1800MHz
    2x25MHz of 2100MHz

    That isn’t a massive amount considering EE owns 2x45MHz of 1800MHz alone never mind the rest of there spectrum.

    • You are correct, O2 doesn’t have any 2.6GHz, I must of mis-read Ofcom’s sheet yesterday.

    • Avatar Matthew Williams

      No Problem I just thought it needed pointing out. You are likely right though I expect they would likely have to sell a small bit of spectrum but imagine whatever it was would only be 2x5MHz of 2100MHz as even together they would only really own a lot of spectrum in 2100MHz. Perhaps 2x5MHz of the 800MHz to EE as well but can’t see that happening. In the other two bands either Vodafone/EE have the same amount or a hell of a lot more.

      O2 and Three own the least amount of spectrum of any network.

    • Avatar Matthew Williams

      In regards to the site sharing that is less of a problem than you would think. Paperwork and legality would be the main problem for that. Currently the MBNL masts are capable of 2G and 4G 1800MHz and 3G 2100MHz so new cabinets would need to be fitted to allow Three’s 2G. But the 2G 900/3G 900/4G 800 could still be mast shared with Vodafone perfectly well.

  4. Avatar Chris C

    Bad news for me.

    three 3g speeds in my area are about 0.3mbit/sec. 24/7

    Plus they have no 2g signal.

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