Telefonica and Hutchison in exclusive talks over GBP10.25bn O2 UK deal

23 Jan 2015

Spanish telecoms giant Telefonica has confirmed that it has entered into exclusive talks with Hong Kong-based Hutchison Whampoa in regards to the latter’s potential purchase of British mobile network operator O2 UK. It is understood that Hutchison has tabled a GBP10.25 billion (USD15.5 billion) cash deal, which includes an initial amount of GBP9.25 billion to be paid at closing of the transaction and additional deferred upside interest sharing payments of GBP1 billion, with these expected to be payable ‘after the cumulative cash flow of the combined businesses of Hutchison 3G UK Limited and O2 UK has reached an agreed threshold’. With the exclusivity period set to last ‘several weeks’, Telefonica said this timeframe would allow it and Hutchison to negotiate definitive agreements, while the necessary due diligence process on O2 UK is completed.

In regards to the development Telefonica said that it marked ‘another step in [the company’s] transformation process, initiated … to become a leading digital telco and accelerate sustainable long term growth while maintaining an attractive remuneration policy’. Meanwhile, confirming the exclusive talks in its own press release, Hutchison noted that that the proposed transaction remains subject to satisfactory due diligence over O2 UK, agreement on terms and signing of definitive agreements, and obtaining required corporate and regulatory approvals.

As reported by CommsUpdate earlier this week, a number of parties had been named as having an interest in O2 UK, including British pay-TV provider Sky, alternative broadband operator TalkTalk and Liberty Global, parent company of the UK’s largest cableco by subscribers, Virgin Media.

United Kingdom, CK Hutchison, Hutchison 3G UK (Three UK), O2 UK, Telefonica