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March 25, 2015

UK telecoms loses player with Three-O2 consolidation

Telefónica will take in £9.25 billion from the deal.

By Alexander Sword

Hutchinson Whampoa’s acquisition of O2 UK has been confirmed.

The Hong Kong-based owner of Three will pay Telefónica £9.25 billion at closing. In addition, deferred upside interest-sharing payments of up to a further £1 billion will be payable after the cumulative cash flow of Three and O2 UK has reached an agreed threshold.

The deal is expected to be completed in 2016 subject to approval by competition regulators.

The acquisition would see the new conglomerate leap-frogging EE to become the biggest mobile operator in the UK, with 33 million customers.

Canning Fok, Group Managing Director of Hutchinson Whampoa, said: "We are proud of the business built up by Three in the UK. It is a market leader in mobile data and customers benefit from a superior high speed mobile data network.

"The combination of Three UK and O2 UK will create a business with unmatched scale and strength that will allow us to better compete against other operators in the marketplace and will also enable us to provide even better service and innovation to UK customers in a market that will remain fully competitive.

He added: "This very significant investment for Hutchison also reflects our continued confidence in the UK economy and its commitment to maintain and foster a dynamic telecommunications sector."

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David Dyson, CEO of Three commented: "Three’s leadership in mobile data together with O2’s strength on network coverage is a great combination that will bring very real benefits to businesses and consumers throughout the UK. The highly complementary network assets will deliver market-leading coverage and capacity for talk, text and data and will be well placed to satisfy rapidly growing demand."

The deal remains subject to the approval of regulators, who may object to the reduction in the number of major mobile operators. The consolidation has produced concern among consumers that they may be hit with price rises due to the lack of competition.

However, Charlotte Patrick of Gartner believes that these fears are unwarranted.

"This is a highly regulated market in general, and regulators would have a serious problem with major price rises," says Charlotte Patrick, Research Director at Gartner. "[Telecoms] regulators in the UK have been on the side of the consumer for a long time."

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