(Image Credit: William Hook)
UK consumers may soon face fewer choices for mobile networks if a series of major acquisitions go ahead. In November last year we reported BT’s intention to buy the UK’s largest mobile operator, EE, in a proposed £12.5bn deal. That acquisition would significantly reshape the market and position BT to offer the UK’s first true quad-play bundle of fixed, broadband, TV and mobile services.
The operator is already finding it difficult to attract 4G subscribers, and trails its rivals’ numbers.
Hutchison Whampoa, owner of Three UK, has been exploring a purchase of O2. Acquiring O2 would create the largest combined customer base among UK mobile operators. Reports indicate the transaction is moving forward, with Telefonica said to be consulting investment bank UBS AG to assess the feasibility of a roughly £9bn sale.
This would not be the first time assets controlled by Hutchison and Telefonica have changed hands. In June 2013 Three acquired O2’s Irish operations for €780 million. Telefonica’s interest in exiting or reducing its UK exposure aligns with its broader strategy to cut debt. Combining Three and O2 in the UK would help both companies better position themselves to compete against an expanded BT/EE.
These mergers would reduce the number of national mobile operators, leaving three dominant players: BT/EE, Three/O2 and Vodafone.
Although Vodafone remains one of the largest operators by overall market share, it would become the smallest of the three in this new lineup and could struggle to keep pace. Vodafone has lagged rivals in 4G adoption: EE leads with around 4.2 million 4G subscribers, followed by O2 with about 2.1 million and Three with roughly 2 million. Vodafone trails with approximately 0.9 million 4G subscribers.
Looking at spectrum holdings, a combined BT/EE would control the largest share at about 45%, Vodafone would retain roughly 28%, and a merged Three/O2 would account for approximately 27%—bringing that combined operator onto a more even footing with Vodafone.
Hutchison reportedly does not feel rushed to complete a deal immediately, in part because the BT/EE transaction is not expected to close until 2016. Still, the Hong Kong-based group is likely to move quickly to strengthen its competitive position, and a deal could be concluded before the end of the year if it secures regulatory approval.
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