Telefónica has agreed to sell O2 Ireland to Hutchison Whampoa's 3 Ireland for at least €780 million ($1 billion) and as much as €850 million in a deal that will enable the Spanish operator to reduce its debt to below €47 billion this year and 3 to realise its growth ambitions in the market.
According to Bloomberg, Hutchison said the deal would quadruple 3 Ireland's market share to 37.5 per cent with 2 million customers. It follows a previous attempt by Hutchison to buy Eircom, which owns the Meteor and eMobile mobile brands, in a €2 billion deal last year.
"This gives us the scale and financial strength to drive competition," Robert Finnegan, chief executive of 3 Ireland, told Reuters. "We will continue to be aggressive in the market going forward and we would like to be number one in due course."
Finnegan added that the deal, which is subject to regulatory approval, is expected to take between six and nine months to complete, and is also expected to be referred to the European Union because of the possible impact on consumer pricing.
The decision is another indication of the continuing trend towards consolidation within the telecoms industry in Europe, said Analysys Mason in a research note.
"Declining revenue growth and market fragmentation are causing mobile operators to consider consolidation in order to grow profits," said Patrick Kidney, senior manager and head of Analysys Mason's Dublin office.
The combined firm will have 120 stores in Ireland. O2 Ireland generated €136 million of revenue in the first quarter, which Reuters noted was lower than any of the company's other European businesses, and down 12 per cent year-on-year.
Analysts at Espirito Santo told Reuters that the O2 Ireland sale was a good move for Telefónica despite the sale price being at a 10 per cent discount to fair value, since the business was small and not central to its strategy.
"This should enable Telefonica to reduce its leverage by approximately 1 percent at the end of 2013," the analysts said in a note.
Meanwhile there were also some red faces at 3 Ireland as it also had to deal with a major network outage that affected hundreds and thousands of customers across the country.
As the Irish Times pointed out, the timing could not have been worse.
For more:
- see this Reuters article
- see this Bloomberg article
- see this Financial Times article
- see this Irish Times article
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