Telecoms stocks received a jolt yesterday after Asia’s richest man launched a £10 billion bid for UK mobile operator 02.
Tycoon Li Ka-Shing’s Hutchison Whampoa group, owner of Three, yesterday confirmed it had entered into exclusive talks to buy the rival group in a deal that would create the UK’s largest mobile phone operator.
Spanish-based Telefonica’s decision to sell O2 to the Hong Kong-based group follows a decision by BT to walk away from a deal for the business, which began life as Cellnet, in favour of EE.
Tycoon Li Ka-Shing’s Hutchison group said it had entered talks “over a period of several weeks” to buy O2 for £9.25bn in cash followed by deferred payments of up to £1bn.
Telefonica confirmed the talks, saying the deal marked another step in a transformation which would “allow the company to strengthen its financial flexibility”.
Industry figures from Espirito Santo show EE as currently the biggest of the mobile phone players with 35.2% of the market, followed by O2 on 28.5%.
But the latter combined with Three’s 8.4% share would see it climb into first place.
Hutchison said the transaction remained subject to due diligence over O2, agreement on terms, and corporate and regulatory approvals.
“Telefonica has entered into an exclusivity agreement with Hutchison Whampoa in relation to Hutchison’s potential acquisition of O2 UK, Telefonica’s subsidiary in the United Kingdom, for £10.25bn in cash,” Telefonica confirmed in a statement yesterday.
The move comes a month after BT entered into exclusive talks over a £12.5bn deal to buy EE.
Telefonica snapped up O2 for £17.7bn in 2005, four years after the business was spun-off from BT.
Its proposed takeover comes as Europe’s telecoms firms are jostling to reposition themselves, with BT’s move on EE designed to focus on a convergence between fixed and mobile services. Meanwhile Vodafone, the number three player in the mobile market, has outlined plans to offer broadband services and has been subject to speculation that it has designs on Sky to strengthen its position in the UK and give it access to TV operations in Europe.
The group has already moved for cable operators in Spain and Germany over the last couple of years.
Hutchison Whampoa’s move for O2 represents the latest UK acquisition for Mr Li across a range of sectors.
Earlier this week his Cheung Kong Infrastructure group bought train rolling-stock firm Eversholt for £2.5bn.
His other UK investments include retailer Superdrug, two water authorities and a major English port, and UK Power Networks.
* BT shares closed 9.9p higher at 431.1p yesterday, while Vodafone rose 1.2p to 239.9p on expectations that it may be prompted to strike a telecoms deal of its own.