Following confirmation that EE and O2 are in talks to sell themselves to BT, Hutchison Whampoa has emerged as another potential acquirer of the mobile operators.
Hutchison, which owns the UK’s smallest network operator, Three, could table a bid for…
Following confirmation that EE and O2 are in talks to sell themselves to BT, Hutchison Whampoa has emerged as another potential acquirer of the mobile operators.
Hutchison, which owns the UK’s smallest network operator, Three, could table a bid for either EE or O2 before the end of the year, several sources familiar with the matter told Reuters.
The report suggested that an offer from the Hong Kong telco would follow BT’s decision on whether it would prefer to buy EE or O2.
Analysts have estimated that O2 could fetch between £9bn and £10bn (US$14.1bn and US$15.7bn), while EE could go for between £10bn and £11bn ((US$15.7bn and US$17.3bn). The price may depend on how a transaction is weighted in terms of cash and stock.
The British fixed-line operator confirmed it was approached by O2’s owner, Telefonica, and EE’s parents, Orange and Deutsche Telekom, at the start of the week about potential transactions.
BT’s share price has risen almost 7% since the start of the week with investors bullish on the company’s drive into mobile.
BT plans to launch a consumer MVNO next year and analysts have suggested O2 and EE’s owners are concerned that BT could launch a quad-play bundle and disrupt the market.
It is not clear which operator BT will pursue. The UK incumbent already has an MVNO agreement with EE, but has a historical relationship with O2, which was spun-off from BT in 2001 when it was known as BT Cellnet.
For Hutchison, EE could be the preferred option as it already has a network sharing agreement with the operator. However, the Hong Kong operator is reportedly a tough negotiator which may hinder a deal with Orange and Deutsche Telekom, who themselves may find it hard to agree on which deal to go for.
In addition, Hutchison is focused on mobile, whereas EE also offers fibre optic broadband services, so a potential purchase of fellow pure-play mobile operator O2 could be a cleaner deal.
BT’s acquisition of a mobile operator is not expected to come under as much regulatory scrutiny as one by Hutchison, as it would not reduce the number of players in the mobile market.
Hutchison has been the protagonist in four-to-three mobile consolidation in Ireland and Austria in recent years. The company won European Commission approval for unprecedented mergers, but the regulatory reviews were lengthy and remedies substantial.
In addition to Ireland and Austria, the EC has also approved a four-to-three merger in Germany between O2 Deutschland and E-Plus.
However, in none of those three countries has the number one mobile player by customers been involved, which would be the case if Hutchison moved for EE. That would create an operator with subscriber numbers in the region of 36 million, dwarfing O2 and Vodafone’s customer bases; roughly 24 million and 19 million respectively.
