Reports claim talks over a potential deal are at an early stage as Spanish telecoms group considers its options after missing out on a sale of its UK business to BT
Three’s owner Hutchison Whampoa is in talks with Telefonica about buying its O2 business in the UK for £9 billion.
According to a report in the Sunday Times yesterday, which cited unnamed city sources, discussions about merging the companies are at a preliminary stage and there is no certainty a deal will be finalised.
Further reports over the weekend stated Telefonica has been examining various possibilities for the future of O2 since last summer.
One person close to the situation said that “everyone is still speaking to everyone” including Hutchison.
They claim Telefonica would favour cash rather than the offer of a share in a combined group because of its need to reduce debt.
However, it added any deal between Hutchison and O2, which is the UK’s second largest network behind EE with 24 million customers, could face opposition from Ofcom, which has said it strongly supports having four mobile operators in the UK.
Any possible deal would follow BT’s decision last month to enter exclusive talks to acquire EE for £12.5 billion after it chose the UK’s largest mobile operator over O2.
It would also follow a similar deal Hutchison struck with Telefonica’s O2 Ireland operation last July, which saw it buy its rival for €780 million.