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O2 may return to BT
Monday 24 November 2014 11:40:35 by Andrew Ferguson

At a time when market dominance in the dark fibre infrastructure by BT is being fought against it seems Telefonica may be willing to sell O2 UK to the BT Group. BT has its own mobile arm selling to the business sector already, with a consumer launch on its way, but re-acquiring O2 after the original sale in 2005 would kick start their entrance into the mobile market.

BBC Business Live is covering the unfolding drama. Rumours of Telefonica looking for a way out of the UK market have been around for a while, but selling to an existing large mobile operator would have been problematic, but given the increasing pressure on BT Group over access to Openreach ducting, a sale of a mobile arm may be a protracted regulatory battle. The reason being that the mobile market will be frightened of the ability of a BT/O2 arm to exploit the Openreach duct network, particularly as backhaul capacity is the key to the success of 4G.

There are other dark fibre and duct providers, but while many have tried none have gained the same sort of network footprint as Openreach, but ultimately the only real way we will see competition is if competitors were to build their own dark fibre network in the half of the UK where there is no major competition.


Posted by TheEulerID over 2 years ago
Surely under any such takeover, O2 would simply have to use the same wholesale services as any other mobile operator. It should be very easy to police too given that BT & O2 are wholly separate.

This is not to say it wouldn't benefit BTW, as clearly O2 would be a captive customer.

However, you do have to question the feasibility. I assume Telefonica will want cash (they bought it that way). BT is not exactly swimming in cash so would probably require a rights issue to fund it.
Posted by TheEulerID over 2 years ago
It seems I'm wrong. The discussions with Telefonica are for a buyout using BT equity as payment.
Posted by Hubz over 2 years ago
There is also speculation that another operator is looking to flog their "UK arm" of mobile business to BT as well.
Posted by mdar5 over 2 years ago
What - you mean mobile business in the UK is not a licence to print money and fleece the consumer as everyone seems to think.

Well I never - who'd have though it
Posted by otester over 2 years ago
Let them have EE/O2 if they will open the network up like with OpenReach.
Posted by fastman over 2 years ago
this ia all about quad play , broadband, tv, calls and Mobile -- from one place

Posted by zyborg47 over 2 years ago
I hate this quad play idea. I still prefer to get my services from different companies.
Posted by gerarda over 2 years ago
BT's sale of O2 shows the lack of vision of their management in the middle of the last decade. Could not see the potential of either mobile or broadband and so not surprising they could not see their convergence either.
Suspect they still preferred a vision of black phones hardwired to the wall.
Posted by TheEulerID over 2 years ago

BT didn't sell O2. It was a split forced by institutional shareholders in order to get them to sign up for the rights issue required to get BT out of the £30bn debt they were in due to incurring heavy mobile costs (4G licences, takaovers & joint venture buy-outs).

The shareholders got pro-rata shares in O2, and Telefonica bought the debt free company a few years later for £18bn.
Posted by TheEulerID over 2 years ago

So it might have been short sighted institutional shareholders, but they saw an O2 being unencumbered with debt as being better value.

In any event, at the time the regulatory regime was looking very unfriendly towards BT offering mobile bundles. I'm sure BT management wanted to retain O2, but that huge pile of debt (ironically mostly built up financing Cellnet/O2) meant their hand was forced.
Posted by gerarda over 2 years ago
It was forced only because BT did not see the case for retaining mobile as a core integrated business.
Posted by TheEulerID over 2 years ago

Did you not read what I said. It was the city and the institutional shareholders that forced the issue. Ultimately it's the shareholders that own the company, and the large ones that call the tune. The company management are ultimately hired hands.

Go read the reports from the time about it.
Posted by TheEulerID over 2 years ago

Just to show this goes on all the time, and such is the nature of commerce, here's a current story about some institutional shareholders trying to force a demerger of Global Services.
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