Three’s owners ready to buy O2
More mobile network mergers ahead as Three prepares bid for jilted O2
The owners of mobile network Three are preparing a bid for O2, after the UK’s second biggest mobile network was shunned by BT. O2 was thought to be BT’s top target when the company announced it was in takeover talks with both EE and O2 before Christmas. However, BT plumped for EE, leaving O2 jilted at the altar.
Three’s parent company, Hutchison Whampoa, had expressed an interest in buying whichever network BT discarded, and now it’s preparing to table a £9 billion bid for O2’s UK business, according to a report in The Sunday Times. That would instantly make the merged company the UK’s biggest mobile network, whilst further reducing the already scarce competition in the UK mobile market.
The reported £9 billion fee would be significantly less than the £12.5 billion offer BT has tabled for EE, although EE has a larger customer base and a more widespread 4G network.
It’s uncertain how the merged network would be branded, given that O2 has four times as many customers and, arguably, better brand recognition than Three. The Three name is also now something of a misnomer, originally used to highlight the launch of the company’s 3G network at the turn of the century. With the market now midway through the transition to 4G, Three’s owners may use the takeover as an excuse to jettison the outdated brand, either adopting the O2 name or creating a new brand altogether, as EE did when T-Mobile and Orange merged.
The two proposed deals will raise renewed concerns about the lack of effective competition in the UK mobile market. Telecoms regulator Ofcom was effectively forced to guarantee Three some spectrum in the 2012 4G auction, through fear of reducing the market to just three major operators. If the mergers are approved, however, that’s exactly the situation the UK will find itself in, with BT/EE, Vodafone and Three/O2 being the only mobile companies to operate their own networks (companies such as Tesco Mobile and Virgin Mobile are ‘virtual’ operators that piggybacks on others’ networks).
That will almost certainly mean less money in the government coffers when it comes to auction 5G spectrum, which Ofcom last week claimed could raise mobile broadband download speeds to a staggering 50Gbits/sec (yes, gigabits, not megabits). There were five successful bidders for 4G spectrum in 2012: BT, EE, O2, Three and Vodafone. Four of those five will likely have merged come the 5G auction, wiping out almost any prospect of a bidding war for the once valuable chunks of air space.