back to article Telefónica to offload O2 to Three daddy Hutchison for £10.25bn

Telefónica confirmed this morning it has entered into an “exclusivity agreement” with Hutchison Whampoa that could see it offload subsidiary O2 for up to £10.25bn in cash. Talks between the pair surfaced last weekend and if signed and sealed will further consolidate the mobe carrier space, coming weeks after BT turned its back …

Three will remain as good as Three, but with more cells to get a signal from?

Or Three will do what Sky did - buy Be Broadband, and instead of inheriting the better service, it actually imposes the larger crapness.

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Actually O2 bought Be, and Sky bought O2 broadband. I've been transferred along the way and the service has steadily decreased, not by much but definitely a downward slope.

I can see why Sky want to buy a Mobile provider, to facilitate quad-play services, but Three don't have TV or landline services so I can see further consolidation..

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Li Ka-Shing?

kerching!

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Re: Li Ka-Shing?

To be honest I would of just Li was Cashing in on an opportunity.

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So the UK once had the most competitive mobile markets..

..and soon it wont, hopefully the CMA (formally Competitions Commission) will not allow this, but as the CC never rejected anything before I have little hope the new name will of changed their working practises.

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Re: So the UK once had the most competitive mobile markets..

Given that when Hutchison owned Orange they were pretty good (all downhill after French & German equivalents of BT bought it), and that Three are generally better than the other big players, I think O5 (or whatever they'll call it) might actually improve on O2.

Unfortunately the deal fees and acquisition premium will mean price rises, and that's the one area where the CMA ought to intervene, to make sure customers don't pay the bill for boardroom games. Crude items like price capcs wouldn't work, but they could insist that deal fees and goodwill are written off as part of the transaction. Sadly they won't, so it'll be price rises all round.

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Anonymous Coward

Re: So the UK once had the most competitive mobile markets..

TBH - I suspect that price rises are inevitable. From what I can gather, we seem to enjoy some of the cheapest rates out of Europe and the US. Personally I don't mind paying for a reliable, decent service, even it it means more. But I suspect that I will still get the same bitty crap for more money.

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Re: So the UK once had the most competitive mobile markets..

Given that when Hutchison owned Orange they were pretty good - agreed.

all downhill after French & German equivalents of BT bought it - Deutsche Telekom never had a hand in Orange. Hutchison sold it to Mannesmann, who were swiftly bought by Vodafone and forced to divest, at which point France Telecom snaffled it.

Three are generally better than the other big players - better coverage and pricing*, maybe, but O2 has much better customer service. Ideally, we'd get Three technology with O2 customer service, but what's the betting it'll be the other way round?

* I have a PAYG Three SIM just to take advantage of their 'Feel at home' overseas prices.

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Re: So the UK once had the most competitive mobile markets..

" Ideally, we'd get Three technology with O2 customer service, but what's the betting it'll be the other way round?"

History says that the crap outcome is the one to expect. But I think you have to bear in mind that Li Ka-shing is not one of the world's richest men for nothing, and he's a big infrastructure investor. As an example, his group (in the form of Cheung Kong Infrastructure Holdings) bought the electricity distribution companies serving London and the SE for about £5.5bn, and the same outfit have just splashed £2.5bn on Eversholt, on the of the three large UK rail leasing companies.

In part this interest in infrastructure is because he's playing a long game (which is usually good for customers), and in part because he's looking for safe haven investments in stable markets. That could bode very well for the required LTE/4G investment needs, particularly when competitors like Vodafone have to go grovelling to the capital or equity markets every quarter. Don't forget that the main reason Telefonica will be selling up is because they don't want to have to pony up the network investment costs. Interestingly, one of the two main reasons EDF were selling UK power networks was because they didn't want to pay the network investment needs, and Cheung Kong were happy to buy something with investment needs.

It's also worth have a browse for Li Ka Shing's life story. Real rags to riches stuff that makes me take my hat off to him.

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Re: So the UK once had the most competitive mobile markets..

>>>>Ideally, we'd get Three technology with O2 customer service, but what's the betting it'll be the other way round?

This is the O2 that declared customer service to be non core to its role as a network operator and shoved everyone over to Capita?

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Re: So the UK once had the most competitive mobile markets..

CMA - Room for some confusion here...

Competition and Markets Authority (the reborn and merged OFT and CC)

Communications Management Association (part of the BCS)

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Re: So the UK once had the most competitive mobile markets..

Deutsche Telekom never had a hand in Orange.

Presumably Ledswinger's referring to them half owning what's become of Orange.

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Re: So the UK once had the most competitive mobile markets..

"Presumably Ledswinger's referring to them half owning what's become of Orange."

Indeed I was, but the original challenge was correct, because Kraut Telekom were busy at the time with what became T-mobile, and didn't really have anything to do with Orange's decline into mediocrity.

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Re: So the UK once had the most competitive mobile markets..

We get lots of manhole cover explosions in London because UK Power Networks doesn't maintain them properly. That didn't happen when Électricité de France owned them.

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Anonymous Coward

Re: So the UK once had the most competitive mobile markets..

Three's customer service has got better over the years... It just took time for the people working in the Indian call centers to learn English... I have had some very interesting conversations with Three over the years, often ending with me being very pissed off or extremely confused...

I find Vodafone to have the best customer service, but not the best price plans or speeds...

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Giffgaff?

Any news/thoughts on what will happen to giffgaff?

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Re: Giffgaff?

Thats exactly what I was wondering.

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Don't forget Tesco Mobile

Which AFAIR is already 50% owned by O2. With Tesco in slim down mode this could join the upcoming Threenopoly.

Every less choice doesn't help ...

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Re: Don't forget Tesco Mobile

Given Tesco's retreat from the Landline business, maybe it goes away completely?

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Re: Don't forget Tesco Mobile

"Given Tesco's retreat from the Landline business, maybe it goes away completely?"

Don't think so. I think Tesco Mobile is a nice earner, and they'll keep it going as long as they can keep getting network access. We might assume that the smaller number of MNO's will try and squeeze the MVNOs out by hiking access prices, but if that happens the MNOs will inevitably find themselves on the receiving end of a CMA referral, and that would be a very high risk gamble, because the CMA might propose "remedies" that really crap on the network operators, like splitting the infrastructure side from the retail operation and requiring open access.

Having said that, there's no upper boundary on corporate stupidity.

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Don't forget the other MVNOs

Virgin mobile originally sat on top of T-Mobile's network and expanded onto Orange's infrastructure when the two merged. Are they not going to have something to say about their bitterest rival buying the EE network from under them?

"the CMA might propose "remedies" that really crap on the network operators"

Could the CMA demand that as a condition of allowing these mergers, the network operators have to return their spare spectrum licences and sell off some network infrastructure to a new entrant, e.g. making Virgin Mobile actual rather than virtual?

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Possible problems

There are bound to be some problems. O2 and Voda has an infrastructure agreement to mast share and 3 are actually partners in MBNL with EE to share infrastructure. Not too sure how the CMA will view that.

3 also have a large amount of spectrum, including the lump that EE had to unload after the merger, not sure how that fits in with o2's lump. OFCOM might have an interest in that quite apart from the competition problems.

If and when the new annual license fees are decided, that too might have an effect on the new companies pricing.

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Re: Possible problems

Three and O2s spectrum holdings fit together pretty well, I think. They are presently third and fourth in terms of spectrum holdings, with Three having more 3G and 4G spectrum than O2, and O2 having a 2G holding at 900MHz that Three lacks. Merge them together and they will have a (very slightly) larger holding than Vodafone and a much smaller one than EE. I can't see any competition issues with the spectrum holdings. The network share agreements might take a little time to untangle, but I am sure this can be done. The regulator may be involved, or might not. A similar untangling was necessary after the T-Mobile/Orange merger, but they managed it.

There may be spectrum issues with the EE/BT merger, though. EE has a lot more spectrum than any other network, and BT has an additional holding at 2600MHz that they bought in the 4G auction and aren't using. It is likely that divestiture of this holding (or some of EEs other spectrum somewhere) will be a requirement if the BT/EE merger is going to be permitted. In this case it will be interesting to see who ends up with it. Without an O2/Three merger one would expect it would likely end up with O2, who are at present quite short of 4G spectrum. With an O2/Three merger, it's harder to tell.

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Re: Possible problems

"not sure how that fits in with o2's lump"

O2's lump is mostly exactly where needed - at 900MHz (better rural and indoor coverage).

This is an important asset for any company concerned about customer service. It's just a pity there's the old 450MHz NMTS band can't be pressed into service too.

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Re: Possible problems

Mast sharing..."Not too sure how the CMA will view that."

I doubt they'll care. I work for a company in the middle of a CMA market investigation, the CMA focus on "theories of harm" to consumers. It's fairly easy to show that mast and infrastructure shares benefit customers rather than harm them. So long as the MVNO's don't complain about discriminatory network access charges (which would reduce competition and harm consumers) then it's very unlikely that the CMA would take a negative view of asset sharing.

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Re: Possible problems

What would be nice is that this could give 3 users later on access to 2g network as o2 uses 2g900 and I think 2g1800 (i have not checked what o2 uses on 2g) so at least you he able to make a call when you have no 3g signal on 3 network, 3 would be able to completely remove the 2g roaming agreement with EE as well (as o2 2g network is the best out of all networks in the uk)

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Re: Possible problems

3 don't have a 2g roaming agreement. It's the MBNL ownership that causes a conflict of interest. If they take over the infrastructure share with Voda and retain the partnership with EE their will be a spider in a complicated web.

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Re: Possible problems - SCOFFCOM

If SCOFFCOM stick their dirty little fingers in this in any way whatsoever, and I do mean in ANY way, It'll only end in tears for the users.

Possibly also for the networts. No, I mean networks. No, on second thoughts, networts.

Mind you, when I finally caved in and got a mobile in 1995 - working all over town, wife expecting our first child, needing to be contactable etc Orange (Hutchinson) was the new kid on the block. At £17.50 per month including a whole 15 mins of talk time it was by far the best low cost deal around. And it soon got a reputation ... as one of my customers said "Orange - oh - that's the one which Works"

Then Hutch started 3 and had to get rid of Orange - to preserve competition I believe. I seem to remember some Regulator involvement. Can't remember who it could have been.

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Re: Possible problems

"I work for a company in the middle of a CMA market investigation"

I feel your pain! I'm numbing it with beer and El Reg!

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Last of the thoroughbreeds

Presuming this goes ahead, and Three/O2 begin the auto-roaming between each other and "Mast consolidation", we'll end up with yet another b*stard network like EE... Ghost signal, lots of dropped calls, brief periods of "No Service" whilst the handset tries to sort something out which it was never designed to do...

Vodafone will be the UK's last thoroughbred mobile network, operating as GSM was intended.

Let's hope that Voda's promises to deliver the UK's best indoor coverage over the coming couple of years comes true. Otherwise, we're doomed.

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Re: Last of the thoroughbreeds

>>>>Vodafone will be the UK's last thoroughbred mobile network, operating as GSM was intended.

When is it going to start then?

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Re: Last of the thoroughbreeds

"Vodafone will be the UK's last thoroughbred mobile network, operating as GSM was intended."

$orkplace has a contract with Vodafone. It's a pity they have the worst coverage of any of the companies and are completely unusable around here. (Helldesk response amounts to "we have your money and your contracts, ha haaaa")

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using an O2 bundle abroad?

So if the deal goes through, will Three extend to O2 customers their fantastic policy of allowing free use of UK call/data/text bundles whilst roaming in various supported foreign countries?

... and on a related topic, what has happened to the EU's proposed move to price all INTRA-EU roaming same as home tariff - thought this was due in 2015 but all seems to have gone very quiet?

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Re: using an O2 bundle abroad?

I'm sure due to timescales of merger existing O2 customers will be tied to their contracts as is. Longer term though this may turn out to be good for O2 customers.

I just left O2 (or NO2 as they should be known - no data on 1/2 of the motorway network and GPRS doesn't count or work with google maps) and moved to three. Better call quality and much better and faster data. They seem to have improved significantly since I was with them last time.

Hopefully if they bring those improvements to O2 then it could be the 3/O2 could be the best network by a long shot.

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There's got to be a gag about the new company name, but I can't quite nail it.

3 + 02

Ozone

O6

Five.

Really need to put another element into the mix to get properly creative.

Come on, someone can do better than me, surely.

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If O2 is frequently NO2 then adding Three becomes NO3 or... Nitrate?

and "Okay NO3" becomes KNO3.. Now all we need is C and S from somewhere...

No, this isn't working.

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"Really need to put another element into the mix to get properly creative."

See icon.

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I'm going to call it O3.

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Mithers

O2 were ok but didnt't have a mast in the valley I moved to. T-Mobile did, but when they merged to form EE that mast was degraded when they consolidated their networks. Fortunately 3 put a mast in and I've been a happy customer ever since. Now I'm worried about the next network consolidation. If I lose that mast I'm knackered again. Neither of the work mobiles - O2 and EE - get a good signal, which is fine for my purposes, but I need my personal one to work.

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Re: Mithers

If you have half decent broadband you can always deploy a Femtocell at home (3 Home Signal). You can't buy them in store but if your signal is nonexistent at home, Customer Retentions will get one sent out to you free of charge.

They work well, actually, the little blighters :)

Pretty sure Vodafone have a similar product (SureSignal, if memory serves right), but you'll have to pay around 50 quid to get it.

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Re: Mithers - Better option: 3 InTouch app

Actually 3 have a new app, "3 InTouch" which runs on your mobile directly and places calls and SMS over your home wi-fi. Even on a bad wifi signal I get excellent call quality.

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Re: Mithers - Better option: 3 InTouch app

"Actually 3 have a new app, "3 InTouch" which runs on your mobile directly and places calls and SMS over your home wi-fi. "

I've used the Orange "signalboost" equivalent, and the O2 effort. The O2 one was shite and didn't work well, the Orange version was fine (but is no longer available for download). ISTR that the Orange system was UMA, whereas the O2 thing was simply some crap wifi VOIP client.

The sad thing is that the Orange system showed what could be done, but UMA doesn't seem to have had any wider takeup amongst MNOs.

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WTF?

blimey!

My Google branded phone uses O2, so is my data now going to be scraped by the 'merkins and the chinese?

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Re: blimey!

In fairness, it already was.

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Follow the Money...

... So, anyone else think that even more masts etc are likely to be housed on or moved to land owned or leased by UK Power Networks fairly soon?

And my money goes on O3 being the new name for the combined behemoth!

Wonder where this leaves Sky's quest to buy a Mobile Network for their wannabe Quad play offering?

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