Three About to Become the UK's Biggest Network as £10bn O2 Takeover Deal Looms

By Gerald Lynch on at

What's it take to buy your way to becoming the UK's biggest mobile phone network? A cool £10bn by the looks of things. Three UK owner Hutchison Whampoa has entered into "exclusive negotiations" with Telefonica to buy O2, the UK's second biggest mobile network, for a tidy £10.25bn.

The deal would be split between an initial £9.25bn payment, followed by a deferred payment of £1bn after completion of the deal and approval by regulatory authorities.

Three (currently the UK's smallest operator behind Vodafone) would jump to having 41 per of the UK mobile network market share with O2 under its wing. Between them, the networks currently have 31 million customers.

An O2 spokesperson offered up the following statement:

3 is known for campaigning on behalf of its customers, much like 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.

It won't be quite as simple as slapping down the chequebook though. Even if O2 and Three were to remain two separate brands, regulatory bodies would have to look into the possibility of it being a monopolising move. Reducing the number of UK mobile network players, any merger would see Three and O2 combined leapfrog EE, the current biggest UK mobile network, which stands today with 32 per cent of the market share.

EE itself is readying for big changes, having recently been bought out by BT for £12.5bn, as the telecoms giant looks to become a quad-play leader, offering broadband, home phone, mobile and TV packages under one subscription.

Should the Three/ O2 deal come to fruition, it's not clear what effect that would have on Sky's rumoured interest in the network. It's possible that Sky is hoping to combine O2's mobile packages with its TV subscriptions, or act as its own MVNO, piggybacking O2's mobile infrastructure.