Three UK Announces O2 Acquisition

After months of negotiation, Three UK’s owner Hutchison Whampoa has announced the acquisition of O2 for £10.25 billion. It is the second carrier acquisition in the past 12 months, following BT Group’s £12.5 billion acquisition of EE.

The news comes as no surprise considering Three UK revealed it was in “exclusive talks” with O2 in January. The two companies will merge to form the largest mobile carrier in the UK, with just shy of 35 million subscribers.

This puts additional pressure on the two other major carriers EE and Vodafone, currently holding 26 and 19 million subscribers respectively.

Spanish telecommunications provider Telefonica revealed the acquisition through a press release, but did not say what brand would stay, O2 or Three. Telefonica acquired O2 in 2005 for £17.7 billion from BT Group, a move that has been criticised by Telefonica shareholders.

It is likely that Three will be the future brand for the two carriers, considering after the O2 acquisition in Ireland, Three maintained the brand. It might be risky to remove O2 however, considering many of the freebies given to subscribers are motivators for subscribing.

The acquisition will most likely be reviewed heavily by regulators in the UK. Even though the broadband and wireless market is more competitive than in the United States, the UK still needs to be careful to disperse any monopoly attempts by the carriers.

There were rumors Sky was looking for a deal with O2, but could not raise the capital to afford an acquisition. Sky is now working on a MVNO partnership with both O2 and Vodafone.

Vodafone has also reportedly been in talks with Liberty Global over the acquisition of Virgin Media, although Vodafone CEO Vittorio Colao has refuted those claims.

The goal—at least for BT Group—is to offer a “quad play” bundle, including landline, TV, broadband and wireless. No company currently sports that lineup of features, but almost all providers will by the end of 2016 according to several analysts.

Image Credit: [Neil Turner]