It has been confirmed that Hutchinson Whampoa has been negotiating for “several weeks” to complete the purchase of O2. The communications firm offered £9.25 billion in cash and up to a further £1 billion when the cash flow for the joint venture is assessed. Initially the news came from The FT, which stated that Hutchison Whampoa would make a deal announcement on Friday of last week. The news has been clarified as the company confirmed that Telefónica will not be talking to another buyer.
In part, a statement from O2 read, “We await the outcome of Telefónica’s exclusive negotiations with Hutchison Whampoa…Subject to agreement as a result of these negotiations and any necessary approvals including merger clearance, this will strengthen our future as a leading, and highly trusted UK communications provider at a time when the demand for mobile connectivity has never been greater…Three is known for campaigning on behalf of its customers, much like O2. We are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value, quality and investment in one of the most digitally competitive countries in the world.”
CCS Insight industry analyst, Kester Mann, has suggested the deal could have a side effect for consumers; rising mobile bills. “The deal might not necessarily be good news for consumers…Evidence in other European markets shows that mobile tariffs tend to rise following in-market consolidation. Regulators will be keen to ensure this is not the case in the UK,” said Mann.
Li Ka-shing, a tycoon from Hong Kong, is the chairman of Hutchison Whampoa and controls Three. Li Ka-shing has already acquired Telefónica’s Irish business in order that he could combine it with Three Ireland.
Although the industry’s regulators, Ofcom, would like at least four competitors in the UK, this joint combination of Three and O2 would then create the UK’s largest mobile group with approximately 31 million subscribers. EE would follow as a close second.
[Image via wired]