Huge deal potentially on the way as BT in talks with Telefonica over O2 takeover

What Mobile
November 25, 2014

Telefonica has confirmed it is in ‘high-level’ talks with BT, with the fixed-line and broadband player saying it is in discussions with two mobile operators about acquiring their mobile business.

Earlier reports had stated that that BT and Telfonica were in advanced negotiations over a sale of O2 that would see the Spanish operator gain a 20% stake in the fixed-line and broadband giant.

“Telefónica informs that although conversations with British Telecom are taking place, those are at a highly preliminary stage and there can be no certainty that any transaction may occur with such company,” said the statement. “A further announcement will be made if and when appropriate.”

BT confirmed the talks and said it had been approached by O2 and another operator about acquiring their mobile business. Orange chief executive officer Stephane Richard said last week that the current ownership model, where Orange and Deutsche Telecom own half the business each, was “unsustainable”.

The deal would give Telefonica a foothold in the fixed-line, broadband and TV markets while BT, which recently signed an MVNO agreement with EE, would acquire a mobile customer base of more than 24 million.

BT, which also owns a slice of 4G spectrum, is expected to launch its consumer mobile offering in the first half of next year. It will be the first time it has offered the service since selling BT Cellnet to Telefonica in 2005.

O2 exited the fixed-line and broadband market in May 2013 through the sale of its 500,000 strong customer base to Sky for £200 million. However, since then EE has added a set-top box service to its mobile, fixed-line and broadband offering and Vodafone announced earlier this month it was re-entering the consumer broadband market it left in 2011. Virgin Media also offers TV, broadband, fixed-line and mobile services to its customer base.

That leaves O2 and Three as the only two mobile operators who currently focus solely on their core business.

There has been no comment from BT or O2 on the matter with a spokesperson for the mobile operator saying they “do not comment on rumour or speculation”.

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