O2 purchase by Three confirmed for 10.25bn as operator consolidation continues

All-cash deal will make Three the largest mobile phone operator in the UK as network consolidation continues across Europe in mobile and beyond 

The owener of the mobile network Three has confirmed it is in exclusive negotiations to acquire O2 UK from Spanish telco Telefonica

The deal for 10.25 pounds in cash, including an initial amount of 9.25 bn pounds followed by a deferred 1bn pounds, blocks Sky's reported bids for the network and will make the combined Three and O2 operator the biggest in the UK with a 41% share of the market

"O2 and Three in exclusive talks to create UK customer champion," said O2 UK chief executive Ronan Dunne

"The deal remains subject to satisfactory due diligence over O2 UK, agreement on terms, signing of definitive agreements, and obtaining required corporate and regulatory approvals," said a Hutchison Whampoa spokesperson

'Win-win for both companies'

Tha merger will make the Hong Kong-based tycoon Li Ka-shing and his conglomerate one of the biggest foreign investors in the UK. The resulting operator will swell from Three's 7.5 million customers to 31.5 million with the addition of O2, ahead of both EE and Vodafone

Three made a similar deal in Irelan, where O2 Ireland was merged into the Three Ireland brand, which puts a question mark over the future of the O2 brand in the UK. In Ireland O2 was the smaller partner, but in the UK O2 is was the second biggest operator after EE

"The agreement is a win-win for both companies which were looking increasingly vulnerable as pure-play mobile operators in a market rapidly transitioning towards multi-play," said Kester Mann analyst for research company CCS Insight

Pure-play operators only sell mobile services, while multi-play operators sell other services such as TV as well

As the deal will see the number of operators in the UK reduced from four to three, it will be subject to significant regulatory scrutiny. The UK's telecoms watchdog Ofcom will likely play a role, but the European Commission is expected to make the final decision

"Having agreed a similar deal in Germany last year, it may have set a precedent that could see the deal receive the green light, albeit with significant concessions," said Mann. "One possible scenario is that the new company is forced to open its network to virtual providers. This could offer an opportunity for Sky, which lacks a mobile presence."

Consolidation and 'quadplay'

The merger is just one of a wave of consolidation across the European telecoms industry, where reducing operator margins and regulatory pressure has seen major industry players strive to maintain customers and generate additional revenue.

Many have rushed to compete with bundled package providing broadband, landline, mobile and pay TV or "quadplay", which promises to attract subscribers with savings on other services beyond mobile or landline phones

BT's move back into the mobile phone operator market with its purchase of EE for 12.5 bn pounds has put pressure on Virgin Media and TalkTalks, both of which already offered quadplay with mobile service running on either EE's or Vodafone's networks

Europe has been approving consolidation with caveats as the price paid for the rise of 4G and the investment required in building out the new mobile and broadband infrastructure to support increasing bandwidth demands

The challenge facing the Commission and regional regulators in ensuring consolidation results in investment in the networks, rather than cost savings propelling rising profits, and maintenance of competitive pricing for consumers

"The deal might not necessarily be good news for consumers," said Mann. "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"

"Three is known for campaigning on behalf of its customers, much liek 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," said an O2 spokesperson

in one of the most digitally competitive countries in the world said an O2 spokesperson

are confident that an agreement will mutually benefit the customers of both companies

will mutually benefit the customers of both companies

are confident that an agreement will mutually benefit the customers of both companies, as well as drive better value.

is known for campaigning on behalf of its customers

regulators will be keen to ensure this is not the case in the UK

evidence in other european markets shows taht mobile tariffs tend to rise following in-market consolidation

the deal might not necessarily be good news for consumers

maintenance of competitive pricing for consumers

rather than cost savings propelling rising profits

the challenge facing the Commission and regional regulators in ensuring consolidation results in investment in the networks

to support increasing bandwidth demands

investment required in building out the new mobile and broadband infrastructure

has been approving consolidation with caveats as the price paid for the rise of 4G

running on either EE's or Vodafone' network

already offered quadplay with mobile service running on either EE's or vodafone's networks

move back into the mobile phone operator market with its purchase of EE for 12.5 bn pounds has put pressure on Virgin Media

promises to attract subscribers with savings on other services beyond mobile or landline phones

broadband, landline, mobile and pay TV or quadplay

Many have rushed to compete with bundled package providing broadband, landline

generate additional revenue

strive to maintain customers and generate additional revenue

where reducing operator magins and regulatory pressure has seen major industry players

the merger is just one of a wave of consolidation across the European telecoms industry

consolidation and quadplay

lacks a mobile presence

this could offer an opportunity for Sky, which lacks a mobile presence

one possible scenario is that he new company is forced to open its network to virtual providers

albeit with significant concessions

may have set a precedent that could see the deal receive the green light

having agreed a similar deal in Germany last year

is expected to make the final decision

will likely play a role

will be subject to significant regulatory scrutiny

reduced from four to three

the number of operators

as the deal will see the number of operators in the UK reduced from four to three

analyst for research company

rapidly transitioning towards multi-play

were looking increasingly vulnerable as pure-play mobile operators in a market

was the second biggest operator after EE

was the smaller partner

puts a question mark over the future of the O2 brand in the UK

was merged into the Three Ireland brand

ahead of

ahead of both EE and Vodafone

the resulting operator will swell from Three's 7.5 million customer to 31.5 million with the addition of O2

his conglomerate one of the biggest foreign investors in the UK

the merger will make the Hong Kong-based tycoon Li Ka-shing

obtaining required corporate and regulatory approvals

signing of definitive

agreement on terms

remains subject to satisfactory due diligence over O2 UK

un exclusive talks to create UK customer champion

reported bids for the network

followed by a deferred 1bn pounds

an initial amount of 9.25 bn pounds

The Owener of the mobile network Three has confirmed it is in exclusive negotiations to acquire O2 UK from Spanish telco

as network consolidation continues across Europe in mobile and beyond

all-cash deal

as operator consolidation continues