Exclusive acquisition talks between BT and EE leave spurned O2 facing a standalone future or a continuation of its own hunt for a partner, with Hutchison Whampoa’s 3 UK a candidate.
BT yesterday (15 December) announced exclusive talks on a deal to acquire EE for £12.5 billion, leaving O2, which had previously been suggested as the preferred target, out on its own.
O2’s parent Telefonica was eager to strike a deal with BT and now faces a number of options. If its motivation was to snag the UK’s leading fixed carrier — so giving itself a share in the country’s dominant converged player — then finding an alternative will be hard. Fixed broadband and TV player TalkTalk has been mooted as a candidate.
If scale is Telefonica’s ambition, then Hutchison Whampoa is reportedly an interested party in the acquisition dance. An O2/Hutch entity would be the UK’s largest mobile operator but would not be so strong on the fixed side. The two sides have history on their side, having previously merged their operations in Ireland. The deal closed earlier this year.
Private equity firms have also expressed an interest in the unfolding situation, but had their eyes on EE rather than O2.
The BT/EE combination could potentially be so powerful in the quadplay market that others will examine their strategies, including Virgin Media and BSkyB.
Virgin Media’s owner Liberty Global is thought to have had talks with Vodafone about a wider European alliance.
And they will also be voicing their concerns about the proposed BT/EE powerhouse to UK telecoms regulator Ofcom.
According to Bloomberg, Vodafone plans to ask Ofcom to guarantee the terms under which it accesses BT’s wholesale network.
BT/EE will also feel pressure to divest some of the spectrum stash the combined entity will inherit. This is another area where rivals are likely to push hard.