Sky, TalkTalk and Liberty Global all discussing tie-up options with O2 UK?

21 Jan 2015

Hot on the heels of reports earlier this week that Telefonica is in talks with Hong Kong-based Hutchison Whampoa about a potential merger of their respective UK mobile subsidiaries, a number of other parties have been named as having a potential interest in the Spanish telecoms giant’s British unit, O2 UK.

According to the Financial Times, alternative broadband provider and pay-TV operator Sky is one such company, with people familiar with the matter cited as saying that discussions regarding a possible alliance between the pair have been ongoing since late last year. Such talks are understood to have been ongoing alongside similar conversations between Telefonica and Hutchison Whampoa, with the latter’s MD Canning Fok earlier this month having gone on record as saying that European consolidation was a top priority for the 3 Group following a corporate restructuring designed to make more funds available. However, it has been suggested that Sky is unlikely to seek to purchase O2 UK, in part as the pay-TV company currently has net debt of more than three times its earnings before interest, tax, depreciation and amortisation (EBITDA) on the back of a GBP7 billion (USD10.6 billion) European expansion. As such, Sky is believed to favour a mobile virtual network operator (MVNO) deal, which would allow it to enter the mobile sector and retain parity in terms of service offerings with its rivals. In line with this, it has also been claimed that Sky has, in fact, discussed the possibility of a virtual operator deal with another UK cellco, Vodafone.

Meanwhile, Spanish news source El Economista has also suggested that both Liberty Global, parent company of the UK’s largest cableco Virgin Media, and alternative broadband and fixed voice provider TalkTalk have held informal talks with Telefonica regarding possible tie-ups with O2 UK.

United Kingdom, CK Hutchison, Liberty Global (incl. LGI), O2 UK, Sky, TalkTalk, Telefonica, Vodafone Group