Hutchison Whampoa has entered into exclusive talks to buy the British mobile business of Telefónica for £10.25bn, a deal that would create the UK’s largest mobile group.
Hutchison, owned by Asia’s richest man Li Ka-shing, confirmed this morning that the two companies have entered “several weeks” of negotiations over the potential acquisition. Hutchison’s Finance Director Frank Sixt said however, that there was “still work to do” before a definitive agreement could be reached.
According to a statement this morning, Telefónica said the deal would see a cash payment of £9.25bn in the first instance, followed by deferred payment of £1bn. If agreed, the deal will create a link between British mobile operator O2 and Hutchison’s Whampoa’s Three and would be completed around mid-2016, said Sixt.
Although the deal would revolutionise the UK’s mobile market, it could frustrate Industry regulator Ofcom seeks to maintain at least four competitors to keep prices low for consumers. Hutchison’s network Three has been particularly prominent in offering the lowest tariffs.
The Hong Kong tycoon Li Ka-shing has been something a big spender recently, having acquired Eversholt for £1.1bn this week, and now possessing a third of the UK’s trains.
Although there are hesitations from Ofcom’s, the decision would probably be taken in Brussels given the international ownership of the two groups. Sixt believes there is a “good probability” of attaining European regulatory approval, citing Germany, Austria and Ireland as examples of mobile markets that have been allowed to shrink from four players to three.
But there is also a good probability that the news will bring an abrupt increase in mobile prices, what with fewer mobile companies