Report: Tesco plans to take full control of MVNO if Hutchison buys O2 UK

Tesco emerged as another company that hopes to benefit from the potential takeover of O2 UK by CK Hutchison, after reports said the UK supermarket giant views the proposed merger of O2 with Three as an opportunity to take full control of its MVNO business in the country.

The supermarket group, which has operated an MVNO in a 50:50 joint venture with O2 UK since 2003, was said to have been among a number of rival companies and customers that attended a closed-door meeting between CK Hutchison and the European Commission to discuss the planned O2-Three merger on Monday this week.

Citing unnamed sources, the Telegraph said that if the merger succeeds, Tesco is aiming to buy the stake in Tesco Mobile that it does not already own and forge a long-term network capacity deal with the newly merged Three UK and O2 UK. Hutchison is expected to be open to such a deal because it might help convince the EC to approve its own takeover proposal.

Tesco Mobile currently has about 4.5 million customers. The cost of buying out the O2 UK stake could be up to £300 million (£389 million/$427 million), sources told the Telegraph.

Other attendees at the meeting with the EC reportedly included Vodafone, BT, Sky, France's Iliad and UK Broadband -- some of which are said to have hopes of picking up network assets that Hutchison may divest to secure EC approval of the planned merger.

Meanwhile Hutchison described this week's talks with the EC as "fruitful", although few details of the talks have been revealed.

"Today's hearing has given CKHH the opportunity to have another fruitful exchange with the commission and the member states' representatives concerning its proposed acquisition of O2 in the UK," Hutchison said in a statement, Reuters reported.

As things stand, the EC has until Apr. 22 to reach a decision on whether or not to allow the proposed £10.25 billion deal to go ahead. Hutchison has already made some promises that it hopes will help overcome some of the biggest objections to the planned merger. For example, it has reportedly said it would work with rivals to maintain two existing network-sharing arrangements in the market -- one between O2 UK and Vodafone UK, and the other between EE and Three UK.

It also pledged a price freeze on mobile services for five years, said it would invest £5 billion in the combined business over the same period and promised to sell off some of its network capacity to allow other competitors to enter the market.

For more:
- see this Telegraph article
- see this Reuters article
- see this Bloomberg article

Related articles:
Report: CK Hutchison to meet EC over UK deal on Mar. 7
CK Hutchison seeks to calm fears over post-merger network sharing deals
Mallinson: O2, Three UK merger could produce a dynamic marketplace
Virgin Media CEO lends support to O2/Three UK deal
Ofcom CEO calls on Brussels to block planned O2/Three merger

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