Reports: Sky could play key role in future O2 UK, Wind Italy deals

The Sky group could play a pivotal role in future deals both for O2 in the UK and Wind in Italy, according to reports.

UK broadsheet the Telegraph suggested that "at least five buyout specialists" are seeking the backing of the UK-based pay-TV giant for a potential £9 billion (€11.6 billion/$13 billion) bid battle between private equity firms for O2 UK.

In Italy, meanwhile, Bloomberg reported that VimpelCom and CK Hutchison are in talks with Sky, Iliad and others on the possible sale of assets that would enable the two companies to secure European Union regulatory approval of their plan to merge Wind Italy with Three Italy.

Until recently, O2 UK and Wind Italy appeared to have a similar future: both mobile operators were targets of CK Hutchison. However, the European Commission (EC) has already blocked the Hong Kong-based company's plan to buy O2 and merge it with Three UK, and is carrying out an in-depth investigation into the proposed Wind deal.

For O2 UK, the future remains uncertain. Last week, reports 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.

The Telegraph now says that Sky has emerged as a "potential kingmaker" in any bid battle because of its plan to launch a mobile service based on the O2 network later this year. The paper, which cited unnamed sources, said Sky would not seek a stake in the operator if it backed a buyout but could invest £2 billion in a strategic partnership to ensure better wholesale terms.

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.

Over in Italy, CK Hutchison's plan to buy Wind is not yet dead in the water but there are doubts it will succeed following the EC's decision to block the proposed acquisition of O2 UK. Bloomberg, which also cited unnamed sources, said Sky could back Iliad or other bidders to gain network access in Italy.

The EC has until Aug. 18 to reach a final decision on whether or not to allow CK Hutchison to buy Wind Italy and merge it with Three, thereby reducing the number of mobile network operators on the market from four to three. The commission is expected to issue a statement of objections to the proposed merger in June.

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

Related articles:
Report: O2 UK CEO considers £8.5B MBO for former CK Hutchison target
EC blocks proposed O2/Three UK merger; CK Hutchison considers legal challenge
Three is no longer a magic number in EU telecoms
EC opens in-depth investigation into Hutchison's planned Wind Italy deal
Xavier Niel: Leaving no stone unturned

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