Hong Kong conglomerate Hutchison Whampoa, parent of 3 UK, entered into an agreement to acquire Telefonica’s O2 UK, the country’s second-largest mobile operator, for £10.25 billion – subject to EU regulatory approval.
Some £9.25 billion will be paid at closing, with a further £1 billion due when the combined business hits certain targets.
If all goes according to plan, completion of the transaction is expected in 2016.
The prospect of BT’s acquisition of EE, also awaiting regulatory clearance, is no doubt a factor in Hutchison and Telefonica seeking to pool their UK assets and become a stronger competitor.
The acquisition of O2 UK will create the number one mobile operator in the country with almost 33 million customers, Hutchison said.
The acquisition “will provide our business with the scale and financial strength necessary to be an even more effective and aggressive competitor in the rapidly evolving UK telecommunications sector,” it said in a statement.
Canning Fok, group managing director of Hutchison, noted the deal “will create a business with unmatched scale and strength that will allow us to better compete against other operators in the marketplace and will also enable us to provide even better service and innovation to UK customers in a market that will remain fully competitive.”
According to Stefan Zehle, CEO, Coleago Consulting, “it is in data roaming prices that we see huge differences between 3 and O2”, adding that the two companies “are considering maintaining both brands which would get around the problem of aligning prices but would also result in higher costs to the merged company”.