Competition in the UK mobile sector could be dramatically reduced after Hutchison Whampoa, owner of Three confirmed plans to buy O2 from Spain’s Telefónica.
If approved by regulators, the deal would see the number of major networks reduced to just three.
Last month BT passed on the chance to buy O2, which it spun-off in 2002, preferring to embark on a £12.5bn deal to buy EE and allowing it to offer ‘quad play’ packages of broadband, home phone, TV and mobile.
That decision prompted weeks of speculation about O2’s future as a standalone network.
In a statement Hutchison Whampoa confirmed it planned to buy O2 UK for £10.25bn in cash and said the two firms had entered “into an exclusivity agreement” to agree final terms.
The talks are expected to last “several weeks”.
Last year Hutchison Whampoa purchased O2 Ireland and today’s announcement paves the way for the two branches to be reunited under a single owner.
A successful deal would also make it less likely that Sky, BT’s pay TV rival, would be able to purchase its own mobile network forcing it to resell airtime on an existing network should it choose to compete in the ‘quad play’ market.
While such a virtual network arrangement would allow the firm to compete on product range, it would be unable to benefit from the lower costs and efficiencies available from having its own network.
A combined Three/O2 would have around 32m customers, ahead of EE’s 28m.
