A major telecoms takeover is in the works as Spain’s Telefonica has made a 26 billion euro bid for UK mobile operator 02. It is offering nearly 3 euros per share in cash, that is 22% more than Friday’s closing price.O2’s board is backing the deal, but immediately there was speculation that Germany’s Deutsche Telekom could turn this into a bidding battle.
Deutsche Telekom did discuss a possible joint bid for O2 with KPN, its Dutch counterpart,in August, but nothing came of that.Telefonica’s Chairman Cesar Alierta remains confident. He said: “O2’s integration in the Telefonica group will enhance our growth profile, it will allow us to gain economies of scale, it will open the group to two of the largest European markets with a sizeable critical mass and it will balance our exposure across business and regions.”
Telefonica is the fifth largest telecoms company in the world by market value and the second biggest in Europe.Deutsche Telekom might run into problems with competition regulators if it does try to mount a rival bid as it already has operations in the UK and Germany. Telefonica,which is the the largest telecoms operator in the Spanish-speaking world, has virtually no geographic overlap with O2. It has moved very quickly to put this deal together.Reportedly it approached the British firm just last week and was given access to the accounts over the weekend.O2, which is Europe’s sixth-largest mobile phone company, has been at the centre of take-over speculation since it was demerged from BT in 2001
because of its lack of scale relative to rivals, and its strong position in the UK market