Li Ka-shing, the richest man in Asia is in the process of buying O2, Britain’s second largest mobile provider, which is currently under the ownership of Spain’s Telefonica.
Hong Kong Tycoon Li Ka-Shing To Acquire Britain’s O2 For $15.4bn
Ka-shing’s company, Hutchison Whampoa, based in Hong Kong is already the owner of the Three mobile network. Combining O2 and Three will make the Hong Kong-based firm the largest mobile conglomerate in the UK.
Were this acquisition to happen, it would bring down the number of UK mobile operators down to three, a move that may stifle competition and in the end give consumers little choice. Presently, the main operators are the Three, Vodafone, EE and O2.
As Hutchison Whampoa plans to buy out O2, other operators are also in negotiations, with British Telecom rumored to be in talks to buy EE, a rival operator.
Regulators based in Brussels would have to approve the deal before the acquisition can go ahead. Frank Sixt, Finance Director at Hutchison Whampoa asserts that the acquisition should not be problematic because there are telecommunication deals that have happened in other countries and have led to the reduction of the number of competitors.
According to Sixt, ‘The European Commission has been positive about several cases of consolidation and this sets the precedent for the present transaction.’
However, observers still think that possible consolidation may face some problems. According to the Chief Research Officer at Ovum, a telecommunication-consulting firm, the greatest concern is whether the merging of Three and O2 will require customers to dig deeper into their pockets.
Similar consolidation deals in other parts of Europe including Austria where mobile operators have declined down to three and prices have shot up significantly.
O2 released a statement guaranteeing customers of both companies that the merger will be beneficial to everyone. The statement asserted that the move to consolidate the two companies would also lead to better quality and value for the end consumer.
According to BBC Technology Correspondent, Rory Cellan-Jones, the current times are quite torrent for the UK mobile phone industry. Only a couple of years ago, there were five mobile operators in the market. With the consolidation of 02 into Three, the playing field will be narrowed down to just three operators.
The move by BT to T-Mobile and Orange is not as problematic as the plan by Hutchison Whampoa. Although Three is a small operator, it offers very competitive pricing; combining it with O2 could make it the largest operator and could possibly push prices up.
A statement by Hutchison Whampoa indicated that the talks would take a couple of weeks to complete.
It is important for potential investors and current shareholders to recognize that there is no guarantee that these negotiations will result into a deal. As such, investors are urged to be careful when dealing with Hutchison Whampoa, Three and O2 shares.
So far, Mr. Ka-shing has doled out over £20bn acquiring overseas companies, with the latest one being the Eversholt Rail Group UK for £1.1bn. The mogul plans to merge his two companies, Hutchison Whampoa and Cheung Kong Holdings into a new company to be listed on the Hong Kong stock market.
|Trade Mobile Operators with|