Three UK owner Hutchinson Whampoa officially in ‘exclusive negotiations’ to acquire O2
Alexandra BurlacuHutchinson Whampoa, the owner of UK's Three mobile network, is apparently getting close to acquiring rival O2, which would make it Europe's largest telecom operator.
Just recently, rumors of such a deal started making rounds, and it's now confirmed that the two companies have reached an important stage in their negotiations.
Hutchinson Whampoa and Spanish telco Telefonica, which is the owner of O2, have officially announced that they are on track for the sale of O2 for £10.25 billion.
"Hutchison Whampoa Limited (HWL), parent company of UK telecom operator Three UK, announced that it has entered into exclusive negotiations with Telefónica, S.A. over a period of several weeks for the potential acquisition of Telefónica, S.A.'s UK subsidiary, O2 UK, for an indicative price in cash of £9.25 billion which would be paid at closing, and deferred upside interest sharing payments of up to a further £1 billion in the aggregate payable after the cumulative cash flow of the combined businesses of Hutchison 3G UK Limited and O2 UK has reached an agreed threshold. The timing and amounts of these payments will depend on the actual cash flows of the combined businesses," reads a press release on Friday, Jan. 23.
The two companies have agreed to a period of exclusivity of several weeks, noted Telefonica, which means that O2 will not negotiate with other interested parties during this period.
This move comes just weeks after BT entered exclusive negotiations to acquire EE, Britain's largest mobile operator. Should BT's deal succeed, it would create a dominant provider of both fixed and mobile phones, as well as internet services.
Hutchinson Whampoa, meanwhile, already owns the Three Mobile network in the UK, and merging it with O2 would make it the country's top mobile operator. O2 has roughly 22 million subscribers, and while Three is currently the smallest of the main network operators in the UK, a merger with O2 would make it the largest, adding to its existing 7.5 million user base.
At the same time, if the deal works out and Three acquires O2, the UK will be left with four key mobile network operators, and four fixed line providers. This would translate to a 41 percent market share of the UK's mobile subscribers, compared to EE's 32 percent and Vodafone's 24 percent, The Guardian points out.
It still remains to be seen whether the deal will materialize, as it's still subject to regulatory approval.
"The transaction remains subject to satisfactory due diligence over O2 UK, agreement on terms and signing of definitive agreements, and obtaining required corporate and regulatory approvals. The negotiations may or may not result in any transaction," Hutchinson added.
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