Report: O2 UK CEO considers £8.5B MBO for former CK Hutchison target

O2 UK could be the subject of an £8.5 billion (€10.7 billion/$12.2 billion) management buyout following the collapse of CK Hutchison's bid for the mobile operator, according to the Telegraph.

Citing unnamed sources, the newspaper said O2 UK CEO Ronan Dunne is exploring a potential buyout that could be financed by private equity companies. It added that Telefónica is not included in the discussions because it is bound by an exclusivity agreement with CK Hutchison until the end of next month.

The Telegraph report suggested that one private equity consortium interested in buying O2 UK is led by former Orange UK CEO Tom Alexander and also includes private equity firms Apax and CVC Capital Partners.

The European Commission (EC) last week confirmed it would block CK Hutchison's plan to buy O2 UK and merge it with Three UK, citing competition concerns as its reason.

Such a combination would have created a new market leader in the UK mobile market and reduced the total number of mobile network operators from four to three.

The commission said it had strong concerns that UK mobile customers would have had less choice and paid higher prices as a result of the takeover, and that the deal would have harmed innovation in the mobile sector.

CK Hutchison said it was "deeply disappointed" with the decision and would consider the possibility of a legal challenge among other options.

Since then, speculation has focused on what the future will hold for the two mobile operators. For O2, options are believed to include a buyout by private equity companies or another operator, with Liberty Global -- which owns Virgin Media -- mooted as a potential bidder.

Telefónica had already been considering alternative options for O2 since it became apparent that the CK Hutchison deal was unlikely to win EU approval. In April, Bloomberg reported that options included finding a new buyer for O2 as well as an O2 spin-off.

The Spanish operator had been banking on the O2 deal to help it reduce its debt mountain of around €49.9 billion.

For more:
- see this Telegraph article

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