Hutchison Whampoa is in early discussions about buying rival O2, a deal that would create the UK’s largest mobile operator albeit without a significant fixed presence in a market driven by convergence strategies.
According to the Sunday Times, Hutchison is mulling a bid of up to £9 billion for O2.
The Hong Kong conglomerate has previously signalled its interest in joining the current round of UK consolidation triggered by BT’s announcement in November that it was in talks with EE and O2.
O2 was left out last month when BT chose EE as a takeover target in a dramatic return to the UK mobile market. O2 owner Telefonica had made clear its interest in merging its UK unit with a rival.
A combination of Hutchison ’s 3 UK and O2 would leapfrog market leader EE, as well as Vodafone, in terms of overall mobile connections, according to GSMA Intelligence.
However, neither Hutch or O2 have exactly set the UK market alight with their 4G sales, an area comfortably led by EE. And the new entity would lack any significant fixed presence, in contrast to its rival.
Other options for O2 include a UK listing or a merger with fixed players Sky and TalkTalk. Telefonica is being advised by investment bank UBS.
A report in the Financial Times downplayed the significance of the Hutch, O2 talks. “Everyone is still speaking to everyone”, said a source.
One report suggested that Hutch was also weighing a merger of its Italian unit, a move it tried previously (and unsuccessfully). No potential partner was named, although Hutch has in the past been linked to both Vimpelcom’s Wind as well as Telecom Italia.