Sunday 25 March 2018

Upwardly mobile Three poised to make bid for O2

Peter Flanagan New Technology Correspondent

IT has been rumoured for months but now it looks like it is finally going to happen.

The proposed marriage of O2's Irish business and its counterpart at Three seemed to move a step closer this week when it emerged that O2's parent company wants bids for the business in by the end of the month.

The Spanish telecoms giant Telefonica has been known to want to offload O2 Ireland for some time. The group is dealing with debts of €47bn and is committed to selling off its non-core assets, including in Ireland.

O2 has long been the second biggest player in the Irish mobile market. That position isn't under threat any time soon, but it has struggled compared with rivals such as Vodafone and even Meteor.

The latest stats from industry regulator ComReg show O2 has a 27pc share of the market and is falling at a faster rate than its competitors.

Its first-quarter results made for grim reading. Profits were down nearly a quarter at €24m, while revenue slipped 12pc to €136m.

Worryingly, it is losing share in the lucrative pre-pay market, where it has just under 740,000 customers. Its bill-pay portfolio remains solid, with some 790,700 customers.


Given the declining numbers across the business, it is perhaps not surprising that Telefonica boss Cesar Alierta Izuel wants out of Ireland.

Although Three has steadfastly refused to confirm its interest, it is widely known that the head of its Irish business, Robert Finnegan, has long coveted O2 here.

Analysts value the Irish arm at about €700m, which is well within Three's wheelhouse.

The company is a comparatively small player in Ireland, with a 6pc market share, but it is part of the global giant Hutchison Whampoa.

In that context, few people doubt the company has the firepower available to launch a bid if it wants to.

Like O2, Three has invested heavily in sponsorship and marketing here. While O2 has been emblazoned across the Irish rugby jersey, the Three logo has adorned the Republic's football team.

The synergies between the two companies are clear. Three instantly becomes an established player in this market and will be able to take advantage of all the economies of scale that come with being a big firm. Telefonica, meanwhile, gets out of a market it clearly has lost interest in.

So far so good. There may be another suitor, however. The cable firm Liberty Global is expected to submit a bid for O2 this month. The UPC owner is another multinational with deep pockets.

It is involved in a tooth and nail battle with Sky to protect its lucrative business of phone, TV and broadband services.

If it can get into the mobile sector as well, it will be even better placed to "lock up" its customers, and make it even harder for them to move suppliers.

More bidders are expected to emerge in the next fortnight.

Despite the downturn, O2 Ireland is still a very attractive bride. What happens next is anyone's guess.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business