Newspaper article The Evening Standard (London, England)

Spanish Set to Snap Up O2 in [Pounds Sterling]17.7bn Takeover

Newspaper article The Evening Standard (London, England)

Spanish Set to Snap Up O2 in [Pounds Sterling]17.7bn Takeover

Article excerpt


MOBILE phones group O2, spun out of BT just four years ago, is to be taken over by Spain's Telefonica in a [pounds sterling]17.7 billion deal.

Talks which began on Friday were concluded late last night with an agreed offer of 200p a share. Today they soared 413/4p to 206p on hopes of a rival bid.

The move follows months of speculation over the future of O2, Britain's second-largest mobile phone company. Both KPN of the Netherlands and Germany's Deutsche Telekom have been in the frame to buy the operator, which sponsors Arsenal football club and the Millennium Dome.

Either could make rival bids but the takeover raises the distinct possibility of virtual operator Virgin Mobile being next on a European shopping list.

Assuming today's deal goes through, four out of five UK mobile networks will be owned by foreign companies, with Orange part of France Telecom, T-Mobile - the former One2One - owned by Deutsche Telekom, and Hong Kong's Hutchison Whampoa owning 3.

Peter Erskine, chief executive of O2, said today: "This is a good deal for shareholders and a very good deal for customers."

He played down talk of any rival bid: "It might attract interlopers but we don't really expect that."

He will make a fortune from the deal and join the Telefonica board as he continues to run O2.

Erskine owns one million shares directly, but also has valuable options which will be triggered by the takeover.

Paid [pounds sterling]1.23 million last year, Erskine said he had not yet agreed terms with his new employer and could roll his share options over into Telefonica's.

"Telefonica is a great company-and, because there is no geographical overlap between our operations, jobs should be safe," Erskine said. "The O2 brand will remain and customers can expect to see an improved service with clear opportunities in roaming, cheaper handsets and more mobile internet services. …

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