Telefónica has agreed to buy UK-based O2 Group in a deal worth GBP17.7 billion (USD31.45 billion). The Spanish telco is looking to expand its reach in Europe and gain a foothold in Germany and the UK. The purchase of O2 ‘will open the group to the two largest European markets with sizeable critical mass and it will balance our exposure across business and regions,’ Telefónica said in the statement. The deal is expected to be completed in January 2006, subject to regulatory approval. The deal comes as something of a surprise, with speculation concerning the sale of O2 having died down in recent months after a rumoured joint bid by Dutch telco KPN and Germany’s Deutsche Telekom was dismissed in August.
O2 – at the time called mmO2 – was created in November 2001 when UK incumbent BT demerged its domestic and international wireless operations into a stand-alone company. The O2 brand was introduced in March 2002 and exactly three years later the official company name changed from mmO2 to O2. The company operates mobile networks in the UK, Germany and Ireland, and had 24.6 million subscribers at the end of June 2005. At that date its largest division was O2 UK, which served 14.6 million subscribers and claimed just under a quarter of the country’s mobile market. In Germany, meanwhile, O2 owns the smallest of the country’s four network operators, while the group’s Irish subsidiary has around a 40% market share. A fourth subsidiary, O2 Netherlands, was disposed of in June 2003 following pressure from shareholders relating to the cellco’s poor performance in a saturated market.