BT confirms talks with 2 mobile network operators including O2

BT said it is in early discussions with two mobile network operators about a possible acquisition, and confirmed that Telefónica-owned O2 UK is one of the companies involved.

"We have received expressions of interest from shareholders in two UK mobile network operators, of which one is O2, about a possible transaction in which BT would acquire their UK mobile business," the UK-based former incumbent stated on Monday. "All discussions are at a highly preliminary stage and there can be no certainty that any transaction will occur.

The company did not name the second network, but EE presents a likely option: Deutsche Telekom and Orange, which each own 50 per cent of EE, are currently exploring various options for their UK business including an initial public offering or an M&A deal. Indeed, Orange CEO Stephane Richard said last week that the 50:50 ownership structure with its German partner was not sustainable in the long term and another solution would have to be found for EE.

Telefónica last week also indicated it had not ruled out selling its UK unit: "If the market goes convergent then we will need to evaluate our options," CEO Jose Maria Alvarez-Pallete told a Morgan Stanley conference, Reuters reported.

BT is one of the drivers of this convergence: the company is in the process of rolling out its own mobile services to consumers and has signed a wholesale deal with EE for LTE network access outside the home. The company is also building a small cell network to support mobile voice and data services within the home.

By offering mobile services, BT will be able to offer so-called "quad-play" bundles of fixed voice, broadband, TV and mobile services, and is expected to have a highly disruptive effect on the UK mobile market.

In a further twist, BT rival TalkTalk has also revealed plans to offer mobile services to expand its own quad-play offering. Like BT, the smaller fixed operator plans to build a small cell network and has signed a wholesale agreement with O2 UK for LTE network access outside the home.

The UK's four mobile network operators--Vodafone UK, O2 UK, EE and Three UK--are now anxiously waiting to see what impact BT's services will have on the mobile market. They are also in the process of establishing their own multi-service strategies, although some plan to go further than others.

Vodafone, which is a leading proponent of quad-play or fixed-mobile convergence in its markets across Europe, has already revealed plans to step up its own multi-play proposition by launching fixed broadband services in the first half of 2015, using a mix of its own fibre broadband network and wholesale lines supplied by BT.

EE, which already sells mobile and fixed broadband services in the UK, also recently unveiled a new home TV service called EE TV. O2 UK has been less convinced by quad-play, however.

For more:
- see this BT announcement

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