31/10/2005

Telefonica bids £17.7 billion for O2

Spanish telecoms company Telefonica have agreed a takeover deal with mobile phone group O2.

Telefonica has agreed to purchase O2, a former subsidiary of BT, for £17.7 billion. The Spanish firm said that it would pay 200p per share – a premium of 22% on O2’s closing share price on Friday.

The deal would give Telefonica a foothold in both the UK and Germany, two of Europe’s biggest mobile phone markets.

The Spanish firm said that O2 would retain its existing brand and would continue to be based in the UK, under the deal.

In a statement, Telefonica said: “The combination with O2 is a logical step for Telefonica in pursuing its strategic goal of providing its shareholders with both growth and cash returns.”

02 has been the subject of bidding interest for several months, with interest from T-Mobile owner Deutsche Telekom and Dutch firm KPN.

Peter Erskine, Chief Executive of O2 told BBC Radio 4’s ‘Today’ programme that the deal was “very good for shareholder value”, as well as for customers. He said that £2 per share was “somewhere in the range of a 25% premium over the last three months.”

Customers would also benefit from better roaming and better worldwide services, because there was no overlapping territory, Mr Erskine added.

(KMcA/SP)

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