BT in talks with O2, EE over possible mobile acquisition

25 Nov 2014

British fixed line incumbent BT is reportedly in negotiations with both the owner of mobile operator O2 UK, Spanish group Telefonica, and the parents of wireless market leader EE over possible competing deals which could see the formation of a powerhouse telecoms provider offering fixed voice and broadband, mobile voice and broadband and pay-TV services. According to Reuters, with BT’s anticipated foray into the wireless sector – expected next year – acting as something of a catalyst for market consolidation, it has been claimed that Telefonica and BT are in early stage talks, with initial suggestions that the latter could acquire O2 UK in return for which Telefonica would gain a 20% stake in BT as part of a ‘strategic alliance’. Meanwhile, with BT also said to have confirmed that it is examining it options with another UK cellco, unnamed sources have reportedly named this as EE. BT has, however, been quick to state these talks could yet lead to nothing, with the company cited as saying: ‘All discussions are at a highly preliminary stage and there can be no certainty that any transaction will occur.’

The development comes just a few days after CommsUpdate reported that Telefonica could consider selling off its British unit if the market continued its move towards converged services. Last week the Spanish firm’s chief operating officer Jose Maria Alvarez-Pallete said at a conference in Barcelona that a sale of the O2 UK business was among the possible options it had with a view to achieving a year-end debt target of below EUR43 billion (USD53.8 billion). While the British unit was said to be performing well, with average revenue per user (ARPU) on the rise and improved churn rates, high profile changes in the market such as the aforementioned expected launch of a mobile service from BT, saw Alvarez-Pallete state: ‘In the landscape as it stands today we are in good shape … But the position taken by BT when and if it launches in mobile will be a key event. Virgin Media and others already have converged offers, but we don’t see a major appetite from consumers. So we’ll see how that evolves.’

United Kingdom, BT Group (incl. Openreach), Deutsche Telekom (DT), EE, O2 UK, Orange Group, Telefonica