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    Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

    This is a discussion on Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica within the General chat forums, part of the Community channel category; Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica - ISPreview UK The Hong Kong based parent ...

    1. #1
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      Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica - ISPreview UK
      The Hong Kong based parent of mobile operator Three UK (Hutchison Whampoa), which before Christmas had initially expressed an interest (here) in buying either ideally EE or perhaps O2, is still in talks to buy Telefonica’s mobile sibling in the United Kingdom and such a deal could be worth as much as £9bn.

      Naturally BT’s recent agreement to enter a period of exclusive negotiation with EE (short of a major shock, BT’s plan to buy EE is unlikely to collapse) effectively means that if Three UK wants to grow, and in so doing shrink the current market of four primary Mobile Network Operators (MNO) down to just.. uh.. three, then its best bet is probably to gobble O2 just like it did with Telefonica’s O2 Ireland division a year ago.

      The Sunday Times claims that related discussions are still in their early stages and offers precious little detail beyond that. Never the less such a move is by no means surprising because Three UK’s CEO, David Dyson, hinted during 2013 that “under the right circumstances” they might be interested in a merger or outright purchase of O2 (here).

      But the situation could easily become complicated, not least because Three UK already has a key network sharing agreement with EE through the umbrella organisation Mobile-Broadband Network Limited (MBNL). On top of that the wider market appears to be moving increasingly towards bundles and convergence, while conversely O2 UK has already abandoned its fixed line consumer broadband and phone interest to Sky Broadband and Three UK is also mobile-only.

      Meanwhile Telefonica is under pressure from its debt pile and a weak Spanish economy, indeed they’ve already said they’re open to the prospect of a sale (here). The difficultly in all of this is what view the regulators, such as Ofcom, will take concerning both BT’s moved on EE and Three UK potentially jumping on O2. Is it acceptable to have only three primary MNOs? Might some, such as BT, end up with too much market power as a result?

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      It looks like this story has become a lot more prominent now.

      Confirmed - Three UK Enters Exclusive Talks to Buy O2 for £10.25bn - ISPreview UK
      The Spanish owner of mobile network operator O2 UK, Telefonica, has confirmed that they’ve entered into an “exclusivity agreement” with Hutchison Whampoa (the parent of rival mobile operator Three UK) to buy the provider for £10.25bn in cash. Unless the talks fail, which at this stage seems unlikely, then Three UK will ultimately end up merging with O2.

      Until recently Three UK’s parent had expressed an interest in buying either EE or O2 in the United Kingdom, although BT took the option of EE off the table just before Christmas (here) and that left O2 as the only option. In fact many had predicted that O2 would sell for less (i.e. £8bn to £9bn), but it looks as if Telefonica extracted a good price. Telefonica itself has been struggling with debts and wishes to focus more on its home market in Spain.

      The agreement includes an initial amount of £9.25bn, which would be paid at closing of the transaction, and an additional deferred payment of £1.0bn. The exclusivity period will last several weeks, allowing Telefonica and Hutchison Whampoa Group to negotiate definitive agreements, while the necessary due diligence process on O2 UK is completed.

      Telefonica Statement

      This operation marks another step in Telefónica’s transformation process, initiated by the Company to become a leading digital telco and accelerate sustainable long term growth while maintaining an attractive remuneration policy.

      Additionally, this announcement occurs at a decisive moment for Telefónica, following a period during which the company has been proactively managing its portfolio of assets, significantly reinforcing its position in key markets (consolidating Germany, acquiring GVT in Brazil -pending regulatory approvals- or undertaking a commercial and technological revolution in Spain) and therefore increasing its potential for future growth.


      Finally, today’s agreement shows that Telefónica continues to lead the European consolidation process and it will allow the company to strengthen its financial flexibility
      .”
      A deal between Three UK and O2 is likely to attract less regulatory concern than the one between BT and EE, which is largely due to Three UK’s limited scale and spectrum ownership in the United Kingdom. Similarly BT’s move to buy EE may actually help Three UK’s chances of passing regulatory scrutiny and vice versa, since the regulator would see a single operator under BT as being less dominant if its rivals are also perceived to be strong.

      But none of this means to say that the process won’t still suffer from complications, not least because Three UK already has a major network sharing agreement with EE through the umbrella organisation Mobile-Broadband Network Limited (MBNL). Meanwhile O2 has a similar deal with Vodafone.

      On top of that the wider market appears to be moving increasingly towards bundles and convergence, yet O2 UK abandoned its fixed line consumer broadband and phone interest to Sky Broadband in 2013 and Three UK is similarly mobile-only.

      On the other hand Three UK and O2, which we should perhaps call ThreeO2 or just “Throat” because it sounds better , might equally be able to take advantage of their unique position in the market as fixed line broadband ISPs would not see them as a direct threat and may be more inclined to buy virtual mobile (MVNO) solutions from them (e.g. Sky Broadband.. perhaps). Assuming they don’t also announce their own fixed line business of course, but that would require an agreement with somebody else.

      Finally there’s the big question of what customers will think? Right now the United Kingdom’s mobile market is in the biggest single state of flux that we’ve ever seen and as a result the end picture remains somewhat unclear. Customers unhappy with today’s deal will be left with fewer choices, a move to the consumer complaints riddled combo of BT owned EE (assuming that completes) or switch to Vodafone. At least two options is better than one or none.

      Equally there’s the question of how Three UK’s more low-cost orientated nature will play into future products and whether the brands will both be retained or merged under a single name. On top of all that neither Three UK nor O2 have their own fixed line business, which isn’t just a matter of consumer products but is also useful for supplying network capacity. Both BT/EE and Vodafone already have this and that’s a major advantage in their corners.

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      Not sure it would really matter to me if Three and O2 became one.
      From a mobile standpoint they all seem to offer very similar packages for calls and data anyway, so from a competition point of view losing one would not make a lot of difference to the market.
      Do not really ever consider Three when looking at mobile.

      I do remember way back when the 3g dongles first came out we were all given some to try in business. That was on Three and I think was their way into the market.
      It was a very poor and cumbersome service and we all gave up using them. But we all soon gained 3g and company smartphones and removed the need anyway.
      I'm sure I still have it in the loft somewhere.

      Compared to Vodafone, EE and O2, very rarely do I ever see much promotion or know anyone who actually uses Three.
      Perhaps its just not so popular in my neck of the woods.

      So all this looks good for Sky and Vodafone joining together, which I'm all for, heres hoping!

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      I shall be watching this with interest. I have been with 3uk for about 4 years now, mainly for their all you can eat data plan, but sometimes coverage is a bit iffy.
      I have been considering jumping ship at the end of my contract this Spring but if they buy 02, then I would hope their coverage would improve if they can share 02's transmitters.

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      I switched to Three this time last year.

      With the introduction of HSPA & HSPA+ the speeds improved somewhat.

      There is 4G in the area, but not everywhere at the moment.

      Certainly when Three started their coverage wasn't that great, but with investment and later the joint agreement with EE, their coverage of the UK is great for 3G. 4G is improving month by month.

      O2 also has 4G in this area, but again not 100% at this time. Overall their coverage of the UK is quite poor compared to Tree. Hopefully though Three would be able to add to the joint coverage and fill in a few blanks, much like EE has by combining both T-Mobile and Orange in the past.

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      If this does go ahead, I really don't see this being a straight forward take-over and network share by any means.

      Currently EE & Three UK share 3G masts, equipment and backhaul at most of their 3G mobile phone mast sites around the UK (4G is not shared but Three and EE are working together on the 4G roll-out) via the company they set up known as MBNL.

      O2 and Vodafone started at mast site share system when they both launched 4G known as Cornerstone.

      How on earth is all this sharing going to be un-ravelled though? There's no way O2 will be allowed to share the already shared Three sites with EE.
      Last edited by James_Mitchell; 24-01-15 at 07:49 PM.

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      I was looking around the web yesterday to see what else has been going on in the past.

      Basically O2 Ireland was sold to Three and the O2 name is still being used. Anyone on Three who happens to be getting a 2G signal is actually on O2's old network.

      Looking at their forums, I can't see any clear date to indicate when the name will vanish, but I guess if O2 UK is bought by Three, then it won't be too long.

      Three no longer exists in Australia as a separate identity. It merged with Vodafone a few years ago and the new company is still jointly owned by both companies.

      As for sharing the network, I am sure that Three would come up with some kind of agreement to allow this to happen. Certainly that would knock Vodafone for six as their network by comparison is tiny when you look at EE & Three.

      I guess people are worried about the potential of a price rise. It's been reported today that the UK currently has one of the cheapest mobile rates in Europe. This is important.

      The potential for improving coverage is a great bonus for everyone, but there are many gaps with all the networks, even in towns and cities. There is currently a lot of complaining going on about the coverage in the countryside. This is important for anyone who works or lives in the country. From a safety perspective it is important for everyone that the coverage in the countryside is improved IMHO. Will this deal lead to this kind of improvement?

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      There's a good chance that if they do merge, they will have to 'give away' some of the merged mobile spectrum (probably 2G and 3G as neither have a huge amount of 4G spectrum anyway) just as OFCOM made EE do the same thing with their merger and they allegedly 'sold' a chunk of their 1800Mhz spectrum to Three for £1 purely to stop O2 and Voda getting it!!

      O2 do have a fair amount of 900Mhz spectrum which they use for 2G and are re-affirming for 3G. Three need 2G as they have none, so that will be a bonus for better calling in more areas. Lower wavelength spectrum is always better for rural areas as it means fewer masts are needed to provide a wider coverage area.

      The O2 brand is a much stronger brand than Three is though in the UK though so I'm not sure that will go or not? The Three brand screams 'cheap' to me and always has done.

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      Three is very 'cheap' and it's coverage is nothing compared to EE. I'm am constantly in turmoil as to whether to go back to EE and their rubbish CS, but great coverage but expensive product or to stay with Three and their really cheap product but poor coverage.... can't really comment on their CS.

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      Re: Three UK Owner Still in Talks to Potentially Buy O2 from Telefonica

      I've never had any issues with EE CS, the 2years+ I've had a 4G contract with them (was with T-Mobile before that). EE have the shortest call centre queue times by far (on an 'Extra' plan here so I get the fast-track 33 option when calling 150) and I've always been put through to someone in under 30 seconds. EE 4G CS is mostly UK based as well. Coverage wise and 4G speeds wise, EE blow the others away. I very rarely see anything less than a 3G connection with EE anywhere I go now. The only thing that annoys me with EE is that they now has this stupid rule that if you call them in their final 2 hours of their call centre opening times any day, they now charge PAYM users a one-off 50p for the call and they still insist on charging £1.50 a month extra for full itemised billing, though if you keep pestering them about this, they usually cave in and give it you for free as they have with me!!

      EE have announced last week that they are shortly stopping selling all T-Mobile and Orange 3G plans full stop in a few weeks (you have only ever been able to buy TMob or Orange 3G plans in store for the last year or so anyway)....so this probably means the end of of the T-Mobile and Orange brands in the UK within about 2 years now. If you are still on a TMob or Orange plan, you can stay on it but no doubt EE will be giving more incentives to switch to a 4G plan.


      In terms of the Three take-over, I doubt things will start to change for either network for at least another 1 - 2 years at the earliest. Look at EE, their T-Mobile & Orange merger is still ongoing, even now after they announced the merger back in Sept 2009, though I believe it's now reaching the final phase this year as EE still have many areas where any remaining Orange masts still need to get converted to EE/MBNL masts (more coverage for Three users with this as once an Orange mast is converted, Three users can access those 3G masts as well) whilst getting 4G upgraded (for EE customers) at the same time.

     

     
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