Three saw off possible rival offers from Eircom and Liberty Global

Three Ireland's successful €850 million bid for O2
effectively means that it saw off potential rival offers from both Eircom and Liberty Global.

It is understood that all of them had signalled their interest to O2’s owner, Spanish group, Telefónica, following the start of a semi-formal process initiated by the seller in early May.

This involved providing potential bidders with an information memorandum and other details.

Sources close to the process say there was a high level of disclosure.

Three decided to take the initiative and make a formal offer for the business,
anticipating both a July 5th deadline for bids and any such moves on the parts of the other likely players. Due diligence and further negotiations followed.

Hammered out
The final terms were
hammered out over last weekend and the deal itself was announced early yesterday. Barclays and Merrill Lynch advised Telefónica, while Three used JP Morgan and BNP.

The Hutchison Whampoa-owned Three Ireland will pay €780 million up front and a further deferred payment of €70 million, subject to the business reaching specific financial targets, which the buyer refused to reveal yesterday.

Telefónica was known to have been keen to sell the Irish business for some time. It is seeking ways to reduce a €52 billion debt pile amassed over the last decade as it expanded into Latin America and across Europe.

It is committed to cutting that liability back to €47 billion by the end of this year. It has already offloaded a number of Central American businesses for $500 million and is also mulling the sale of its Czech operation.

Mobile operators
While EU regulators will have to approve the Three takeover of O2, it is thought that it faces fewer barriers than Eircom, which owns two mobile operators, Meteor and E-mobile, as well as its fixed-line business, would have.

US-based Liberty Global owns cable TV and fixed-line company, UPC.

If it had gone ahead with an offer and been successful, O2 would have been its first venture into mobile.

Three was known to be interested in expanding its foothold in the Republic, where it has a 9 per cent share of the mobile market.

Unsuccessfully
Last year, it tried
unsuccessfully to buy Eircom out of examinership.

It entered the market in 2005 and has slowly been growing its share of a mature mobile market.

While revenues last year reached €174 million, it still lost money.

However, chief executive Robert Finnegan has
always insisted that Three
and its parent, Hutchison Whampoa, are here for the long-haul.