Report: Tesco plans to offload UK mobile unit

UK-based supermarket giant Tesco plans to sell off its mobile unit in an effort to cut debt, with TalkTalk and fellow Tesco Mobile shareholder O2 UK cited as two potential buyers.

According to a report in the Financial Times, which cited unnamed sources, Tesco Mobile could be worth hundreds of millions of pounds, as it provides an estimated £100 million (€138 million/$154 million) in annual profits to the retail group. The unit is 50:50 owned by Tesco and Telefónica's O2 UK business.

Tesco Mobile uses O2 UK's network and functions as a mobile virtual network operator (MVNO). It has around 4 million subscribers and thus commands the largest customer base outside of the four mobile network owners--O2 UK, Vodafone UK, EE and Three UK.

However, the UK mobile market is highly competitive because of the large number of MVNOs and branded resellers, including the new iD unit set up by Carphone Warehouse.

iD is planning a competitive offer that will include 4G data speeds, free voice, text and data roaming and contract flexibility including 12-month plans. The MVNO will use the Three UK network and plans to start selling its services in May--possibly this week.

In addition, fixed broadband providers TalkTalk, which has already acquired Tesco's video TV service Blinkbox, and Sky have signed separate MVNO agreements with Telefónica in order to expand their respective mobile offerings.

The UK market is also in a state of flux, which may further complicate a sale of Tesco Mobile. O2 UK itself is in the process of being sold by Telefónica to Hutchison Whampoa, while BT is seeking regulatory approval for its plan to buy EE.

Tesco Mobile has certainly been one of the more successful MVNOs, and even moved into devices by launching the Tesco Hudl tablet. However, plans to sell a Tesco-branded smartphone appear to have been shelved due to the competitiveness of the smartphone market.

For more:
- see this Financial Times article (sub. req.)
- see this Guardian article

Related Articles:
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Carphone's iD hailed as more interesting MVNO story than Google's Project Fi
Ovum: Telefónica, Hutchison Whampoa face 'fraught' fight for UK deal clearance
Report: BT to roll out UK mobile services 'this week'
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