Three’s €850m takeover of O2 must wait on regulatory approval
Due to scale of telcom giants, deal could take up to nine months to get green light
Robert Finnegan, chief executive of Three Ireland. Photograph: David Sleator
In a move that saw off competing offers from Eircom and Liberty Global, Three agreed to buy O2 for €780 million in cash, with a further €70 million on condition that it reaches certain financial targets.
However, the size of both Three’s parent, the multinational Hutchison Whampoa, and O2’s owner, Spanish group Telefónica, means the deal must get the approval of the EU’s competition directorate before it can go ahead.
Speaking yesterday, Three Ireland chief executive Robert Finnegan said both parties expected it would take up to nine months before they found out if the Brussels-based watchdog has approved the deal: “It will be business as usual for Three and for O2 until then.”
If it gets the green light, the acquisition of O2 will boost Three’s market share to 37.5 per cent from 9 per cent and leave it with two million users.
The two firms had combined revenues of €803 million in 2012. Three accounted for €174 million of this. Three began talks with Telefónica eight weeks ago and made a firm offer for the Irish business at the weekend, beating Eircom and Liberty Global.
Telefónica, which was advised by Barclays and Merrill Lynch, looked likely to sell the Irish business for 18 months. The Spanish group is struggling with a debt run up during a decade-long expansion in Latin America and Europe.
It aims to cut borrowings to less than €47 billion by year end, from €52 billion at the end of March, to maintain its investment grade rating.
Three entered the Republic in 2005 after winning a long-drawn-out competition for a mobile licence. It has been looking at increasing its share of the market. Last year, it considered buying Eircom, the Republic’s biggest fixed-line operator and owner of two mobile providers, but decided against the move.
Mr Finnegan said the O2 deal will give Three the scale to compete aggressively in the Republic’s wireless market: “This will be very good news for the consumer.” He added Three’s voice and data packages would be made available across the expanded network.
Mr Finnegan pointed out that its parent had the financial muscle to continue investing in Three’s Irish operation.
Assuming it gets approval from the EU, Three will begin merging the two companies’ networks and IT systems, and phasing out the O2 brand.
Telefónica bought O2 in 2006. The business began life almost 10 years earlier as Esat Digifone. That was launched by Denis O’Brien after he was awarded the Republic’s second mobile licence in 1996.
Hutchison Whampoa, 49.9 per cent owned by billionaire Li Ka-Shing, has interests in ports, infrastructure, telecoms and property.