Saturday 20 January 2018

Mobile telco Three in advanced talks to buy €700m O2 Ireland

Indebted parent Telefonica keen to finalise sale before interim results released

Ireland in the RBS Six Nations Rugby Championship earlier this year. How much longer will the jerseys sport O2?
Ireland in the RBS Six Nations Rugby Championship earlier this year. How much longer will the jerseys sport O2?

Joe Brennan, Matthew Campbell and Manuel Baigorri

MOBILE phone operator Three is in advanced talks to buy O2 Ireland, sources said yesterday.

An agreement may be struck before rival bidders are even due to pitch offers on July 5, according to sources.

O2 Ireland owner Telefonica is eager to secure an accord before it publishes interim results at the end of next month. Hutchison Whampoa, controlled by Hong Kong billionaire Li Ka-shing, owns Three.

Telefonica, Europe's most indebted telephone company, may raise more than €700m from the sale of the Irish unit.

The Madrid-based company has said it wanted to cut its net debt to less than €47bn by December from about €51.2bn.


"This is a sensible step toward the company's goal to cut debt," said Borja Mijangos, an analyst at Interdin Bolsa in Madrid. "Telefonica will likely sell more assets this year to soothe investors and be in a stronger position for potential M&A activity."

European telecommunications firms are seeking to consolidate as growth in mobile-data usage slows and heavy regulation slices profits.

If Hutchison and Telefonica's local units merge, Ireland would join Austria and the UK among countries that have recently seen the number of mobile operators shrink.

Telefonica shares climbed as much as 1.6pc to €9.97 in Madrid trading. It was the second-best performing stock of the benchmark IBEX 35 index.

Hutchison's Three Ireland unit, the third-largest cellphone operator in the country, failed in its €2bn bid last year for Eircom when Eircom was under court protection from its creditors. Some €1.8bn, or 40pc, of Eircom's debt was written off during the process.

Three and Telefonica declined to comment on any talks.

Other potential bidders, including Eircom and UPC Ireland, have also received information on the sale.

Telefonica continues to court the other suitors, having given them access to additional data in the past few days, following O2 management presentations in Dublin last week. Officials at Eircom and Liberty Global declined to comment.

O2 generated €1.5bn of sales last year. The company's market share fell to 25pc in the fourth quarter from 34pc two years earlier, as Vodafone, Eircom and Three Ireland added customers. After an $85bn acquisition spree over a decade increased debt and triggered rating cuts, Telefonica chief executive Cesar Alierta began selling assets last year.

The company is studying ways to raise money from its Colombian unit after it shelved plans to carry out an IPO for the company's Latin American division mainly because of valuation.

The Irish and Czech divisions are high on a list of potential businesses for sale, people familiar with the plans said in April. Other candidates include Telefonica's remaining minority stake in China Unicom (Hong Kong).

In March, Telefonica sold $1.3bn of treasury stock to reduce debt.

A month later it agreed to sell a 40pc stake in its Central American assets to closely held Corporacion Multi Inversiones to raise $500m.


Irish Independent

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