Telefonica in talks to sell O2 to Hutchison Whampoa for £10bn

Hutchison Whampoa enters talks to buy Telefonica-owned O2 for £10.25 billion.

In a move that would create the UK’s biggest mobile group, Hutchison Whampoa confirmed that it is in negotiations to buy Telefonica for £10.25 billion. However, Frank Sixt, the finance director of Hutchison, has said there is “still work to do” as they embark on several weeks’ worth of discussions.

It’s the latest buy in a spending spree by Asia’s richest man, Li Ka-shing, who owns Hutchison Whampoa. Recently, Mr Li also spent £1.1 billion on Eversholt, to put him in control of a third of the UK’s trains.

Telefonica O2 and Three would own 40 per cent market share

It seems the joining of Telefonica’s O2 and Hutchison Whampoa’s Three would change the landscape of the mobile market in the UK, while creating a headache for industry regulators. Ofcom wants at least four competitors in the mobile industry in order to keep prices favourable for consumers. However, since Three is currently one of the cheapest mobile operators, the move could shake-up the market.

If O2 and Three combine forces they will own around 40 per cent of the market, with more than 30 million subscribers. The next largest would then be EE with more than 30 per cent, followed by Vodafone who have around 24 per cent.

Fewer competitors means price rises

The duo will be looking to compare their deal to the recent acquisition of EE by BT, as it can be argued that BT is already altering the boundaries in the evolving telecoms market. However, it only seems logical that fewer competitors will likely mean a near instant increase in prices, which could boost the takings of their rivals. In this battle, the consumer will likely lose out.

It’s thought that if the deal is accepted, Ofcom will aim to see the combined network give up some of its spectrum, which mobile operators use to broadcast mobile signals. The rest of the spectrum would be offered to other competitors at a low price.

However, due to the international ownerships of the two groups, the decision will more than likely be taken in Brussels.

Top image: Stratford490