Hutchison Whampoa, owner of UK mobile network Three, has agreed “definitive terms” to acquire O2 from Telefónica for a cool £10.3 billion.
Three’s owner began talks with Telefónica over a merger back in January and the two parties have now agreed a fee of £10.3 billion for the deal to go through. Once it’s been ratified by regulators, this merger will see Hutchison Whampoa become the largest mobile carrier in the UK, owning around 40 per cent of the market.
Hutchison, which is controlled by billionaire business magnate Li Ka-shing, has spent the last two months completing due diligence – the formal investigation process prior to the signing of a deal. Now Ka-shing is ready to move forward with the merger, paying Telefónica £9.25 billion up front, with the remaining £1 billion payment placed on hold until the business hits an agreed level of performance.
Regulatory permission for the deal won’t be a formality, however. While similar mergers have been allowed, such as Hutchison’s takeover of O2 Ireland in 2013, regulators are expected to give the proposed deal a thorough examination, to ensure that competition isn’t negatively affected in the marketplace.
Currently, consumers are able to get good deals on their mobile contracts, as companies desperately try to undercut each other and offer incentives to sign up. But the removal of a major player from the market will see less competition, which could end up costing consumers in the long run unless safeguards are put in place by regulators.
Telefónica confirmed the agreement via the O2 website, stating: “Hutchison Whampoa has today agreed definitive terms to acquire O2 in the UK from Telefónica. The deal agreed is the result of a period of exclusive discussions between the two companies. Closing of the deal is subject to regulatory approvals, but would bring together two respected mobile businesses in the UK.”
The UK’s largest mobile network, EE, is also currently subject to a £12.5 billion takeover bid, from BT. Just today BT launched its own range of 4G deals, hoping to cement its newly assured foothold in the market by offering users TV, home phone, broadband and mobile all in one attractive package.