Nearly a decade ago, BT sold O2 to Telefónica for £17.7 billion. Now reports suggest the two companies may reunite: BT is reportedly in talks with Telefónica to buy O2 back as it pursues a return to the mobile market and aims to deliver a true quad-play offering.
BT could now find itself with access to the assets of both O2 and EE
With O2 on board, BT would be uniquely positioned to offer a genuine quad-play bundle—home phone, broadband, mobile, and TV—under a single brand. BT also benefits from an extensive installed base of broadband routers across the country that could be leveraged to improve coverage and reduce cellular dead zones by supplementing mobile network capacity.
Imran Choudhary, senior analyst at Kantar Worldpanel, commented: “Acquiring one of the largest networks in the country would give BT immediate access to an established customer base and enable it to cross-sell internet, TV, and landline services. O2 would fit well, since nearly a third of O2 customers already take their home broadband from BT.”
In last year’s Ofcom-led 4G auction, BT secured spectrum in the 2.6GHz band, which is well suited to deliver capacity and high speeds. O2, by contrast, won spectrum in the long-range 800MHz band. Taken together, these complementary holdings hint that discussions about a closer relationship may have been underway for some time.
The story becomes more compelling when you consider BT’s recent commercial deal with EE. Last month BT struck an agreement to use EE’s extensive 4G network—a move that would have been unlikely if EE had known a separate acquisition of O2 was imminent. If BT were to acquire O2 while maintaining its arrangement with EE, it could potentially access assets from both mobile operators in addition to its own infrastructure.
BT has issued a brief statement saying it is “assessing the merits of an acquisition of a mobile network operator in the UK.” The combination of spectrum assets—paired with BT’s existing resources—could form a strong and comprehensive consumer proposition. BT also noted that shareholders have expressed interest in selling two UK networks to the company.
Update 11/12/14: Sources indicate BT planned to choose between EE and O2 early next week. Telefónica Chairman César Alierta traveled to London to advance talks with BT regarding O2, while EE’s owners, Orange and Deutsche Telekom, reportedly offered to accept BT shares to help offset acquisition costs.
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