Telefonica to sell British unit for $15.3 bn
Telefonica said on Tuesday that it will sell its British cellphone operator O2 to Hutchison Whampoa for $15.3 billion. Telefonica and Hutchison entered exclusive negotiations over O2 on Jan. 23, Rueters reports. The Spanish operator said on Tuesday that a definitive agreement had now been reached after completion of due diligence on the British unit. The sale will hasten the consolidation of Britain's telecoms industry. Hutchison already operates the Three Mobile network in Britain, and buying second-ranked O2, which has about 22 million subscribers, will make it the top mobile operator in the country. Completion of the deal is subject to regulatory approval, Telefonica said, adding that should take place by June 30, with a possible extension of this timeline to Sept. 30.
The deal also is a milestone for Li Ka-shing, Hong Kong’s best-known billionaire and Hutchison’s largest shareholders, as it will be his biggest overseas acquisition yet and cement his telecommunications and infrastructure company as one of Europe’s top wireless providers, notes the Wall Street Journal. Mr. Li has spent billions of dollars buying utilities such as telecom and even water and waste-management assets in Europe since the financial crisis, taking advantage of relatively cheaper companies as well as assets that have a steady cash flow.
The deal comes at a time when Li, Hutchison’s 86-year-old chairman and Asia’s second-richest man, is overhauling a business empire spanning across industries ranging from phones to infrastructure and retail, writes Bloomberg. Li is merging his two biggest companies and spinning off their real estate assets into a separate unit by later this year. That hasn’t stopped Hutchison from pursuing other deals as Europe’s telecommunications firms combine to gain more pricing power and amid sluggish economies that restrain the industry’s growth. In Italy, the company is in talks to merge its local operations with those of VimpelCom Ltd., according to people familiar with the matter.
Revenue from telecommunications services in Europe will probably decline 1.5 percent this year after falling 2.2 percent last year, according to researcher Ovum. Besides mergers and acquisitions, carriers are pushing for more lenient regulation and introducing faster networks. O2’s sale will help Telefonica reduce its debt pile, which doubled in the past 10 years as the company expanded across Europe and Latin America. Telefonica in February reported net debt of 45 billion euros. Telefonica agreed to sell its Irish unit to Hutchison for as much as 850 million euros in 2013.
