O2 dealers fearing the worst ahead of stock market float

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CK Hutchison were prepared to pay £10.25 billion for O2

Uncertainty surrounds the channel and its future as operator begins search for investors

O2 dealers have hit out at channel uncertainty around the operator’s potential stock market float, with some even fearing for their own futures.

According to reports, Telefónica is in the advanced stages of floating O2 UK on the London Stock Exchange for £10 billion, enlisting the likes of Barclays, UBS and Morgan Stanley to help sell shares to investors.

O2 would remain the majority shareholder, with a 25 to 49 per cent stake potentially placed on the market. This could include MVNO giffgaff and a 50 per cent share in Tesco Mobile.

It follows the collapse of its £10.25 billion sale to Three-parent CK Hutchison in May, which was blocked by the European Commission.

However, dealers claimed the huge uncertainty in the channel, with one fearing for his own future.

Bad feeling

“There is a lot of uncertainty and it’s not a great place to be. I’ve never experienced as much bad feeling in the channel before. I’m a very loyal partner but don’t know where we will be this time next year.”

An O2 spokesperson said an Initial Public Offering (IPO) is just one option being explored, and that this would be separate to its partner channel.

“We regularly review our business strategy for our partner channel to ensure we continue to perform strongly together and deliver for our customers.”

However, dealers still expressed concern around how the operator might be run should investors have a stake in it.

Concerns

One praised O2 for its support to the channel over recent years, but has doubts whether that will be the case if the IPO goes through.

“If you went to O2 and said you needed more money to retain or win a customer, then it wouldn’t have been a problem. With new investors coming in, we don’t know if that will remain the case.”

Another said any IPO is “always a concern because the investor is only interested in selling it onto the next one”.

O2 is holding a partner conference in Slough on October 11 where it will update them on the business and its plans for the coming months.

However, dealers fear O2 is planning changes to the commercial they receive and will take away certain bonuses in order to boost its own balance sheet ahead of an IPO.

“They are trying to make the business fit for the IPO but are cutting a lot of corners,” said one. “Churn will go up and new connections down. They are taking away bonuses and there could be more to come. If they’re not careful, they won’t have any quality dealers left to work with.”

Another added: “My fear is they will try to conserve cash to improve the balance sheet and make the business more attractive to investors.

“In the business channel, October and November are normally good months to make up for the two or so weeks they miss from the middle of December because of the Christmas break.

“They normally push us hard in Q4 but with what’s going on, I’m not sure that will be the case.”

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