Though O2 Netherlands had 1,250,000 customers and revenue of 200m pounds ($310m) in the years to March 31, it was leaking cash and produced an operating loss before goodwill and exceptional items of 119m pounds ($184.5m) last year. The sale will lead to a 1.4bn pounds ($2.2bn) write-off in its last financial year.

O2 said that while it was expected to be close to EBITDA break-even for the full year, it lacked the critical mass to fit the Group’s value creation strategy in the longer term.

The same can be said of a large number of players in the market and the sale and merger of assets is likely to accelerate as carriers look for ways of cutting losses. Having got rid of its Netherlands operation, the question now is what O2 will do with the business in Germany, which is equally lacking in critical mass.

E-Plus, the German unit of Netherlands incumbent KPN NV, is the most logical partner or purchaser. Indeed, preliminary discussions have been held on a full-scale merger. O2 shares have been rising high on merger prospects, particularly the prospect that Hong Kong conglomerate Hutchison Whampoa may look for an outright purchase to add a much needed subscriber base to its recently launched 3G operation in the UK.

The Netherlands unit has been bought by Greenfield Capital Partners, which already owns Enertel NV, the number two dial-up telecoms operator in the Dutch market.

The huge loss of value that the sale demonstrates is another illustration of the absurd behaviour of many of Europe’s incumbent carriers. It was founded in 1996 as a 50-50 joint venture between what is now BT Group Plc and Nederlandse Spoorwegen NV, a Dutch railway company. In 1998, it was awarded a mobile licence and launched its GSM network in 1998.

With an insatiable appetite for overseas acquisitions, BT completed bought out the other 50% holding in the operation for 1.2bn pounds ($1.9bn) in 2000 and then paid a further 266m pounds ($412.3m) for one of the five 3G licenses on offer in the Netherlands.

The operation was handed over to O2 when the mobile operation was spun out by BT and since then O2 has been pre-occupied with overcoming the problems that it was bequeathed by its parent.

Source: Computerwire