Consolidation hit the European wireless market as Spanish telecommunications provider Telefonica said it plans to acquire U.K.-based 02 plc, and Swedish operator Telenor announced plans to acquire rival Vodafone Sweden.
Telefonica said it reached an agreement to acquire 02 for approximately $31.3 billion in cash. The deal will include 02’s operations in the United Kingdom, which serve more than 16.5 million subscribers in England and Ireland; and in Germany, where the carrier serves more than 8.3 million customers.
The offer is expected to close early next year.
Analysts noted the deal provides Telefonica with a foothold in the lucrative German and U.K. wireless markets, which combined have a customer base of more than 141 million subscribers and revenues of more than $52 billion.
“[02’s] integration in the Telefonica group will enhance our growth profile, it will allow us to gain economies of scale, it will open the group to the two largest European markets with sizeable critical mass and it will balance our exposure across business and regions,” explained Telefonica Chairman Cesar Alierta.
The deal also likely will help Telefonica compete against its larger rivals Vodafone Group plc and Orange, which dominate the European market.
Telefonica said it plans to continue using the 02 brand, and that the operations will be based out of its existing headquarters in the U.K. Telefonica plans to continue with its Movistar brand in its current markets.
02 was spun off from British Telecom plc in 2001 and has been seen by many industry observers as a potential acquisition target for some time.
“Today’s announcement comes as no surprise to us,” said Ovum senior analyst and service manager Marta Munoz Menedez-Villamil. “02 has had the `for sale’ tag for a long time, and this is not the first time that it has been approached by Telefonica, if the rumors are to be believed.”
Sweden’s state-run telecommunications provider Telenor said it will acquire the country’s third-largest wireless provider, Vodafone Sweden, for $1.25 billion. The deal includes Vodafone Sweden’s 1.5 million customers, and increases Telenor’s customer base to 5.6 million subscribers.
Telenor noted the deal strengthens its competitive position in the market and also bolsters its offering to the business market, where Vodafone Sweden is its largest competitor.
For Vodafone, which has extensive wireless holdings around the world-including 45 percent of Verizon Wireless-cited competitive and regulatory pressure for exiting the Swedish market.
“We have a good business in Sweden, but the particular industry structure and regulatory environment means that it makes more sense for our customers, our employees and our shareholders for a pan-Nordic player like Telenor to own the company,” said Arun Sarin, Vodafone chief executive.
Vodafone Group plc said it plans to take an $884 million impairment charge in its six-month’s financial results ended Sept. 30 due to the sale. The deal is expected to close early next year.
