The spanish press reported last week that Telefonica and BT may be considering an alliance in the UK. The suggestion appears to be that Telefonica would effectively swap its o2 mobile asset in the UK for a minority stake in the combined entity with BT. BT has been considering expansion into mobile, while Telefonica has reportedly been concerned by its lack of fixed and content assets in the UK market. As such, a deal could be beneficial to both.
BT confirmed the talks following a report in the Spanish press that said Telefonica could end up with a 20pc stake in BT in exchange for O2. Paul Marsch, senior analyst at Berenberg bank, calcuated BT’s stock market value would rise to around £38 billion — with BT itself worth £31 billion and O2’s equity valued at £7.75 billion
The combination would be an incremental negative to Everything Everywhere and to Vodafone, given the emergence of a stronger competitor in the UK. However, if BT really is open to large mobile asset acquisitions in the UK, then presumably the owners of Everything Everywhere – DT and Orange – would also be open to some form of discussions at this point. Rumors have been circulating around the press that EE could very well be a strong contender for acquisition also.
BT said: “We continue to develop our own plans for providing enhanced mobile services to business and consumer customers, in line with our previous announcements. We remain confident of delivering on these plans and have also been exploring ways of accelerating them, including assessing the merits of an acquisition of a mobile network operator in the UK.
“We have received expressions of interest from shareholders in two UK mobile network operators, of which one is O2, about a possible transaction in which BT would acquire their UK mobile business. All discussions are at a highly preliminary stage and there can be no certainty that any transaction will occur.
BT said it remains “confident” of going it alone in mobile but admitted it is “exploring ways of accelerating them, including assessing the merits of an acquisition of a mobile network operator in the UK”.
Vodafone’s recent entry into the market and its growing closeness to TV giant Sky have increased BT’s sense of urgency — and it also threatens EE and O2.