Three set to take on Vodafone in all-out price war after its €800m buyout of O2
PROJECT 'Ozone', the €800m buyout of O2 Ireland by Chinese giant Hutchison Whampoa, owner of mobile operator Three, will lead to an unprecedented price war, according to sources.
The deal, which was first revealed in the Sunday Independent, is Ireland's largest domestic takeover since Superquinn was bought for €450m in 2005. The buyout is subject to regulatory clearance on competition grounds.
It is understood that Three boss Robert Finnegan is planning an all-out assault on market leader Vodafone, with a view to becoming the biggest player in the Irish market.
Vodafone has a 40 per cent market share, with the combined Three and O2 business closer to 37.5 per cent. This may be good news for consumers as a price war would help to reduce costs.
Three is likely to ramp up its grab for business customers, following the deal. It will also invest heavily in new technologies, such as mobile wallet, which will allow more and more Irish customers to make payments in shops simply by waving their mobile phone at a cash till.
The logic for the buyout is compelling as Three will be able to extract major cost savings from the operations of the nationwide mast network.
The deal will also bring a big chunk of extra 4G licence spectrum over to Three, which will now be able to run a superfast network. Last November, Three spent around €51m to buy a 4G licence, with O2 coughing up around €121m for its 4G spectrum needs. This means that Three has been able to vastly expand its 4G capacity at a fraction of the price.
Paying €700m up front for O2 – plus an earnout – represents good value for Three. It has already spent about €800m building up a 10 per cent market share over the last decade. It will almost quadruple its customer numbers for the same price.
The buyout will bring O2's sponsorships under Three, which means that the mobile operator will now have deals with the Irish football team, the Irish rugby team and the Point Theatre. These will be renamed under the Three brand once regulators have approved the deal. It is understood that the Point may be renamed following a customer competition.
Three's sponsorship deal with the FAI ends in 2016. The O2 tie-in with the IRFU also ends that year.
It is likely that Three will run both deals to term and not seek any early exit. The Irish rugby team and its fans will need to buy new jerseys for next year's Six Nations.