Telefónica would consider other buyers for O2
Telefónica would talk to other buyers for its British mobile business if the £10.5bn sale to CK Hutchison were blocked by the European competition authorities.
On Friday, the Spanish group said that there were a number of options for the business such as a full or partial sale or a flotation if the European Commission blocked the Hutchison sale as expected.
Telefónica could also keep the O2 business, and suggested the possibility of a strategic review to expand into other areas in the telecoms and media market.
Hutchison wants to merge O2 with Three to create the UK’s largest mobile operator. However, Brussels competition officials have baulked at the prospect of losing one of the four mobile operators in the UK market, which they fear will raise prices and lower innovation. A final decision is expected in two weeks.
José María Álvarez-Pallete, the new chief executive of Telefónica, told analysts that the company would consider other options for the business if the sale to Hutchison were blocked.
He added that the remedies offered to counter concerns over competition were enough to pass the deal, but added that it could still be blocked for political reasons. “A negative decision cannot be disregarded,” Mr Pallete said.
Ángel Vilá, Telefónica’s finance officer, stressed that the group was in no rush, however, and opened the possibility of raising up to €5bn in hybrid debt.
Telefónica wanted the money from the sale of its British business to pay down debt, although it says that it can help cover its dividend this year in shares if necessary.
Telefónica said it was bound to the agreement with Hutchison until the second quarter of 2016.
Ronan Dunne, chief executive of O2 in the UK, said that the business was “in good shape”, which “created opportunity for us and our shareholders”.
“The UK business is a quality asset,” he said.
Analysts at Haitong said over the short term that Telefónica had “limited options” that would provide the same ability to reduce debt as the sale of O2, including a flotation that would be likely to be at a lower valuation than the deal with Hutchison.
They said: “Spinning off the asset would not allow for any cash in, while a sale of the asset to another buyer would take several months before it is completed.”