The acquisition is part of the convergence drive currently affecting the UK market-place, and will allow O2 to offer its 16 million UK mobile phone customers some form of broadband access. Rival Orange SA recently announced it would provide free broadband to customers spending 30 pounds ($55) a month or more. Vodafone Group Plc is thought to be considering a similar move, although it has publicly stated that it favors an infrastructure-light approach to offering converged services in the UK.

In mid-May, O2 chief executive Peter Erskine hinted at a possible acquisition when he said that the operator was likely to offer customers fixed-line broadband services across its territories, including the UK, in the future. O2 already runs fixed-line operations in Germany and the Czech Republic.

In the Czech Republic and Germany… customers have clearly demonstrated a demand for integrated broadband and mobile packages, said Erskine.

O2, formerly BT Cellnet, has roughly a 25% market share of the UK mobile market. It has operations in Ireland and Germany, as well as the Czech Republic where Cesky Telecom is now known as O2 Czech Republic. It has a total customer base of 27.4 million. O2 was given control of Telefonica Germany and Cesky Telekom following the completion of the Telefonica deal earlier this year.

O2 was spun off from BT Group Plc in November 2001 after the UK carrier fell victim to the prevailing financial wisdom of that time which decreed that mobile operations should be spun off in order to ensure future growth. It is now part of the Telefonica group, after the Spanish carrier paid 17.7bn pounds ($31.3bn) to acquire it last November.

Be has a modest customer base of just under 9,000 broadband customers, which is well behind many of its competitors. However, O2’s interest is mostly down to Be’s local loop unbundling strategy, which has seen it install its own equipment in roughly 150 telephone exchanges belonging to BT Group Plc. It plans to have unbundled 400 exchanges by the end of the year, giving it access to 50% of the UK market. By the end of 2007, it hopes to reach 70% of UK citizens.

Be also uses ADSL2+ technology, which should allow it to offer speeds of up to 24MB/s. O2 is also likely to make a further payment of 5m pounds ($9.2m), depending on certain performance criteria.