Japanese company in exclusive negotiations with Telefónica to potentially acquire O2 UK
Hutchison Whampoa, the Japanese parent company of UK telecom operator Three UK, has announced today that it is set to buy O2 UK for £10.25 billion. The company stated it has entered into exclusive negotiations with Telefónica over a period of several weeks for the potential acquisition of Telefónica’s UK subsidiary, O2 UK.
The deal would result in an indicative price in cash of £9.25 billion which would be paid at closing, and deferred upside interest sharing payments of up to a further £1 billion in the aggregate payable after the cumulative cash flow of the combined businesses of Hutchison 3G UK and O2 UK has reached an agreed threshold. The timing and amounts of these payments will depend on the actual cash flows of the combined businesses.
The transaction remains subject to satisfactory due diligence over O2 UK, agreement on terms and signing of definitive agreements, and obtaining required corporate and regulatory approvals.
However, UK regulator, Ofcom, which has been intent in the past of maintaining four mobile operators for competition purposes, may have something to say as the competition reduces the three businesses. Combining Three and O2 will create the UK’s largest mobile operator with a combined subscriber base of 31 million. EE will be in second place, followed by Vodafone.
Three UK, a subsidiary of Hutchison Whampoa, is a UK 3G network operator covering 98% of the UK population and it is now rolling out 4G to its customers. It is the smallest of the top mobile operators in the UK.