O2 plus Three to equal new number one

25 Mar 2015

Hong Kong-based Hutchison Whampoa Limited (HWL), parent company of British mobile network operator Three, has confirmed it has entered into an agreement with Spain’s Telefonica to buy the latter’s subsidiary, O2 UK. In a press release confirming the development HWL revealed that it will acquire O2 UK for GBP9.25 billion (USD13.79 billion), which will be paid at the closing of the deal, with deferred upside payments of up to another GBP1 billion in the aggregate, with this payable after the cumulative cash flow of the combined businesses of Three and O2 UK reaches an agreed threshold.

A combination of O2 UK and Three will create the UK’s largest mobile network operator with more than 33 million subscribers, and according to HWL the planned tie-up will ‘generate significant synergy potential’. As such, the statement confirming the deal claimed that the combination of the two cellcos would provide ‘the scale and financial strength necessary to be an even more effective and aggressive competitor in the rapidly evolving UK telecommunications sector’, while providing for a business with a better ability to compete while delivering better network coverage and quality of service.

Commenting on the deal, HWL managing director Canning Fok said: ‘The signature of definitive agreements with Telefonica today is a major milestone. Completion of the transaction is expected in 2016 as it is of course subject to conditions, including most importantly, satisfactory approvals from competition regulators.’ Meanwhile, David Dyson, CEO of Three was cited as saying: ‘Three’s leadership in mobile data together with O2’s strength on network coverage is a great combination that will bring very real benefits to businesses and consumers throughout the UK. The highly complementary network assets will deliver market leading coverage and capacity for talk, text and data and will be well placed to satisfy rapidly growing demand.’

With the completion of this transaction remaining subject to European Union (EU) competition approval, Reuters notes that Telefonica hopes this to have been received by 30 June 2015, though there is a possible extension of this timeline to 30 September.

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