Three owner buys O2 for £10.25 billion

March 25, 2015 | 12:22

Tags: #british-telecom #cellnet #mobile-network #securicor #telecoms #telefonica

Companies: #bt #hutchinson-whampoa #o2 #three

Hutchinson Whampoa, the company behind the Three mobile network, has finished its negotiations with Telefónica and has agreed to buy the latter's O2 network in a deal valued at £10.25 billion.

O2 launched in 1985 as Cellnet, a joint venture between British Telecom and Securicor. The company was responsible for some world firsts - including the launch of the first ever General Packet Radio Service (GPRS) network in 2000, allowing data transfer without tying up the handset in a call - but was spun off into its own company by a suddenly mobile-shy BT in 2002 and sold to Spanish telecoms company Telefónica in 2005 for £18 billion.

Hutchinson Whampoa entered into talks with Telefónica regarding the potential acquisition of O2 early this year, planning to merge the network with its own Three brand to create what would become the biggest single mobile network operator in the UK. The talks have now concluded, and the terms agreed: a £9.25 billion initial payment followed by a further billion paid out when agreed-upon cashflow threshold figures are reached. At a total value of £10.25 billion, it's an expensive loss for Telefónica which has seen nearly £8 billion lopped off the value of O2 since its acquisition a decade ago.

The deal will make Three the largest mobile network in the land, but such growth comes with risks: although both Telefónica and Hutchinson Whampoa have agreed terms, the deal can only go ahead with the permission of UK regulatory agencies. As the merger would create a majority market entity, it's likely that the company's competitors will have something to say - and possible that restrictions, up to and including the requirement to split the joint company up in some way, will be enforced as a result.

The companies expect to have completed the deal by June 2016.
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