DoCoMo to join hunt for mmO2?

25 Feb 2004

Japanese mobile heavyweight NTT DoCoMo has said it is interested in UK-based wireless operator mmO2, raising the very real spectre of a possible bidding war for BT’s former cellular subsidiary. Two days ago Dutch incumbent KPN had an undisclosed offer for mmO2 rejected but, despite a hasty announcement that it had no plans to hold further talks with or mount a hostile bid for the UK company, KPN has since qualified its statement, saying that it could make another offer for mmO2 if the latter’s management board recommended its bid, or if a rival bidder emerged; to this end the Dutch PTO issued a statement to the stock market yesterday, clarifying its position with the UK Takeover Panel and reserving the right to bid for mmO2 under ‘certain circumstances’. DoCoMo’s president Keiji Tachikawa has now raised the stakes by indicating that his company would be interested in a possible tie-up with mmO2 on the proviso that the UK company agreed to adopt its mobile internet access service i-mode.

NTT DoCoMo is keen to see i-mode adopted in the UK but to date its efforts have been frustrated by the failure of Hutchison 3G (UK), in which the Japanese company has a 20% stake, to take on board its proprietary system. Although DoCoMo would have to consult with Hutchison 3G (UK)’s Hong Kong parent Hutchison Whampoa before starting any talks with mmO2, the ongoing discord is seen by some as an opportunity for the company to shift allegiance. Hutchison Whampoa is adamant that it is not interested in 2G operators in Europe, leading some analysts and industry watchers to conclude that KPN will return to the negotiating table. Fears over a possible takeover saw mmO2’s share price slip by 7% at the close of play yesterday.

mmO2 was formed as a result of the demerger of BT Group’s cellular arm BT Wireless on 19 November 2001. The spin-off created the new stand-alone entity which, along with the UK operation O2 (UK), comprised Digifone (Ireland), Telfort Mobiel (Netherlands), Viag Interkom (Germany), and Manx Telecom (Isle of Man) – all of which were subsequently rebranded O2 – and its mobile internet portal Genie. O2 (UK) is the jewel in mmO2’s crown, but faces stiff competition in its domestic market where it lags behind rivals Vodafone, Orange and T-Mobile. By the end of December 2003 mmO2 had 13.05 million subscribers in its key UK market, up from 11.95 million a year earlier, but held fourth place with a market share of 22.4%. In October 2003 mmO2 announced it had entered into a strategic alliance with operators in nine countries (and serving 40 million customers), to leverage pricing and services and boost buying power when purchasing equipment. At that time some suggested that the tie-up could herald the beginning of corporate mergers, involving smaller European cellcos like ONE in Austria, Wind of Italy, Amena (Spain), Telenor Mobil (Norway), sunrise (Denmark) and Pannon GSM in Hungary.

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