The future of O2

The future of O2

The pressure on O2’s owners Telefonica to sell the UK operator has continued to build since BT announced its intention to pursue the acquisition of EE. This week the brand was linked with a buyout from Three’s owners Hutchison Whampoa, whilst speculation in Spain linked a host of companies with the network including: Sky, Talk Talk and Liberty Global.

What would be the best move for O2? Here’s a look at the options open to it:


Sell to Hutchison Whampoa (Three’s owners)

The combination of Three and O2 would be a major UK market force, it would be big enough to compete with a BT enhanced EE and put the frighteners on Vodafone. There was positive industry reaction to the prospect of the two companies coming together and there is a history of the two firms doing business. However, there are couple of drawbacks to such a deal; it doesn’t solve the quadplay conundrum for either brand and it would undoubtedly be subject to a great deal of regulatory examination.


Partner up with Sky

Having made some fairly sizable investments on the continent Sky is not really in a position to purchase a mobile network. There also appears to be a degree of reluctance at the media giant to sell the company. Both of which make the prospect of a partnership between the two companies a logical move. Vodafone’s position as Sky’s current partner of choice would be one fairly major obstacle. But if both companies worked together in a smart way it could have a number of the benefits of a buyout without the financial burden.


Sell to Liberty Global or Talk Talk

It seems very unlikely that either of these firms will be launching a bid to buy O2, but their names have both been mentioned by Spanish media outlets and stranger things have happened. Financing the deal for either of these companies would involve some pretty serious borrowing, which could be problematic later on. Both would offer a solution to O2’s quadplay capabilities although they both already have their own MVNOs.


Forge ahead on their own

After it’s revealed that you’re looking to sell an asset the longer the time delay the greater the negative impact on its value. Telefonica has done well to create a buzz around the sale of O2 but that cannot last forever. If they fail to get a satisfactory offer for the network operator O2 may be forced to carry on as part of the Telefonica family. It will undoubtedly be tough for them with all their competitors likely to become stronger, but as O2 has proved in recent years it has the capacity to do steady business with loyal customer base.


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