Last week the owner of mobile operator O2 UK, Telefonica, tentatively floated the prospect of putting the FOR SALE sign up (here) and today BT has confirmed to the Spanish press that they’re already in preliminary talks about a possible purchase or merger. In addition, EE’s shareholders are said to have also approached BT for talks.
BT originally had a mobile division of its own (BTCellnet), which it sold in 2005 (after a confusing 2001/2 rebrand and regulatory pressure) to Telefonica for around £18bn and this became known as O2. BT are also planning to re-enter the consumer market in Q2-2015 with a new 4G mobile service of their own, which will harness their fixed line broadband network and make use of their new MVNO deal with EE.
Telefonica, in a brief statement to the market this morning, said, “Telefonica informs that, although it is in talks with British Telecom, these talks are in a highly preliminary phase and there is no certainty that a transaction will take place.”
A BT Spokesperson added:
“We have received expressions of interest from shareholders in two UK mobile network operators, of which one is O2, about a possible transaction in which BT would acquire their UK mobile business. All discussions are at a highly preliminary stage and there can be no certainty that any transaction will occur. A further announcement will be made if and when appropriate.”
BT was also keen to stress that they’re continuing to develop their own mobile service as planned, although they’re also “exploring ways of accelerating” those plans and this includes “assessing the merits of an acquisition of a mobile network operator in the UK“. Never the less it’s hard to see how this could work without delaying their plans for a launch in Q2 2015.
The EE approach would arguably be more logical, given that they’ve already got a MVNO contract in place and have been developing on that platform for a fair few months (not to mention EE’s home broadband platform that BT manages). But EE would also be a much more significant deal, with the potential for some regulatory concern, while O2 is a familiar entity and one that might attract a fairer price due to the owners seeming willingness to sell.
Up until last year O2 had a fixed line home broadband and phone business of its own, but they failed to make it work and ended up selling the customers to Sky Broadband. O2 doesn’t see a future in bundles, yet BT believes that its planned quad-play model will work and would be a good fit for O2’s mobile network.
UPDATE 25th Nov 2014
As we missed it off our original report by accident, most coverage of this development has since suggested that the exchange could take the form of Telefonica receiving a 20% stake (equity) in BT worth around £9-10bn.
UPDATE 26th Nov 2014
Just in case there was any doubt, the owners of EE (Deutsche Telekom and Orange) have issued the following statement: “Deutsche Telekom and Orange, the joint shareholders of EE, regularly analyse the development of the market in which EE operates, evaluating various strategic options which have the potential to create value for EE’s shareholders and strengthen the market position of EE. As one of these options, Deutsche Telekom and Orange are in exploratory discussions with BT, although it is too early to state whether any transaction may occur.”
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