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Three owner finalises deal to buy O2 in the UK

Hutchinson Whampoa inks agreement to become UK's second major consolidated provider

o2 sign

Three network owner Hutchinson Whampoa has today agreed "definitive terms" to purchase the O2 mobile network. The completed deal will, subject to approval, see Spanish owners Telefonica recieve around 10.25bn for the sale of their UK mobile arm.

The deal comes hot on the heels of a similar 12.5bn merger between BT and EE. This agreement is also undergoing review, as market watchdogs fear that giving BT such a large amount of resources would result in a lack of competition.

However, the announcement of Hutchinson Whampoa's purchase of O2 is likely to tip the scales in BT's favour, by ensuring that there will still be other providers on BT's scale if the purchase goes through. The result of both mergers being successful would be a total of three UK networks, with Vodafone being the only non-consolidated provider.

The deal follows the purchase of O2 assets by Three's parent company in Ireland, which now seems like a test-bed for further takeover. The companies' combined base of existing customers would total over 30m customers if approved, which dwarfs BT's projected 24.5m.

With two major telecom power blocs about to be formed, attention has now shifted to the Competition and Markets Authority. Responsible for preventing industry-wide monopolies, the CMA is now tasked with deciding whether these deals will still allow for fair and open trading.

Mark Collins, CityFibre's director of strategy and public affairs, thinks that Three's deal is a boon for the marketplace, saying that "consolidation is the only way to combat BT's ever-growing monopoly over both the retail and wholesale telecoms sectors".

According to Ovum analyst Matthew Howett, while it's currently unknown what Hutchinson and BT might sacrifice "in an attempt to get things through", there are some likely concessions. Currently tipped to be the focus of any trade-offs are "mobile backhaul, spectrum holdings, and the current network sharing agreements".

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