Report: Telefónica favours keeping O2 UK after failed Hutchison sale

Telefónica could now decide to keep O2 UK rather than seek a new buyer or list the unit on the stock market according to Bloomberg.

The Spain-based operator had wanted to sell O2 to CK Hutchison for £10.3 billion (€13.5 billion/$15.1 billion) as part of a strategy to reduce its €50.2 billion ($56.6 billion) debt, but that deal was blocked by the European Commission over competition concerns.

Since then, there has been ongoing speculation about what Telefónica will do next.

The company has been considering various 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.

Reports have also suggested that the company could be the subject of an £8.5 billion management buyout led by CEO Ronan Dunne and financed by private equity companies.

Last week, UK broadsheet the Telegraph reported that "at least five buyout specialists" are seeking the backing of Sky UK for a potential £9 billion bid battle between private equity firms for O2 UK.

Citing unnamed sources, Bloomberg said Telefónica is now leaning towards holding on to its UK unit and is seeking new ways to reduce debt.

For example, it was reported last week that Telefónica could carry out an initial public offering (IPO) for its Telxius mobile tower unit as soon as July.

The IPO could raise between €4 billion and €5 billion. However, the IPO proceeds would then amount to less than half the amount the company would have raised if it had sold O2 UK to CK Hutchison as planned.

Telefónica has not confirmed the report, but did say in February that an IPO was a potential option for the tower unit.

"In relation to Telxius, Telefónica is analysing alternative strategies, including a possible initial public offering," the company said at the time in a statement to market regulator CNMV.

For more:
- see this Bloomberg article

Related articles:
Report: Telefónica could list Telxius tower unit in July
Reports: Sky could play key role in future O2 UK, Wind Italy deals
Report: O2 UK CEO considers £8.5B MBO for former CK Hutchison target
Three is no longer a magic number in EU telecoms
Telefónica returns to organic growth in Spain

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