back to article O2: Float or flog. What's it going to be, Telefonica?

Spanish telco Telefonica has indicated it could soon hold an IPO of O2 in order to raise funds to pay off debt. Telefonica has previously made noises about exiting the UK market after the EU Competition Commission over the proposed sale of O2 to Three for £10.3bn earlier this year. It had hoped the sale would help reduce its …

  1. Marc 25

    I find it utterly stunning that a business can be £41bn in debt and still be in operation!

    1. Hans Neeson-Bumpsadese Silver badge

      More or less stunning than the fact that an entire country can be trillions in debt and still function?

      1. djstardust Silver badge

        I agree. UK PLC is technically bust but because we "loan ourselves" our own money it's not a problem (or is it ....)

        I love the way the government backs private savings in case a bank goes down but what happens if the whole country goes down the shitter?

        Answers on a postcard .........

    2. Charlie Clark Silver badge

      What tends to matter is the ratio of debt to revenue aka "leverage". Though, thanks to central bank intervention even this doesn't seem to matter any more. Whether it's O2, Dell, Softbank, Japan or the good ole USA, seems people can't get enough debt.

      I mean, after all, what could possibly go wrong?

  2. flingback

    Brexit opportunity...

    Surely if Britain is leaving the EU then Three could now buy O2 (assuming they were still interested)?

    1. Anonymous Coward
      Anonymous Coward

      Re: Brexit opportunity...

      That's a very good point!

      Although I can see 2 snags.

      The first being that this could only be put forward once we have eventually left the EU and given that this would be 2 years from whenever our government triggers article 50 (and there is still no sign of this yet). The question is can Telefonica hang on for another 3 years?

      The second point is that if we reached the point that Hutchinson Whampoa were no longer being blocked by the EU (and assuming that they were still interested after being jerked around for 5 years) then one obstacle still remains which is that without EU blocking the deal I am sure that BT - sorry I mean OFCOM (but same difference) would surely step in and scupper the deal.

      1. Dan 55 Silver badge

        Re: Brexit opportunity...

        3 could buy a minority stake in O2 then later the whole lot once Brexit is done, but there are so many uncertainties that it wouldn't be a good idea to base a business plan around Brexit.

    2. Anonymous Coward
      Anonymous Coward

      Re: Brexit opportunity...

      To be fair, although the veto was ultimately given by the EU, it was a political decision driven by Ofcom and the UK competition authority who made it clear they didn't want the deal to happen and made it clear with very public letters in the media. If they had said 'Yes, we want it' and the EU had said 'no' then it would have been much more sticky.

      So don't blame the EU here who have been the monkey, blame the UK authorities who pushed the EU into a corner on it, yet let the considerably more dangerous BT/EE deal fly through unchecked.

    3. allthecoolshortnamesweretaken Silver badge

      Re: Brexit opportunity...

      Only if the parties involved are willing/able to wait 2+ years, depending on when* article 50 is triggered and the outcome of the negotiations that follow.

      * Word from 10 at tis moment is "not this year".

  3. SW10

    Here come the groundhogs

    A once national telecoms provider decides to divest itself of its mobile arm in order to reduce debt.

    They should float it off into a holding company with a whacky-but-instantly-memorable name.

    I think mmO2 sounds terrific.

    1. allthecoolshortnamesweretaken Silver badge

      Re: Here come the groundhogs

      CO2 ?

      1. thegroucho
        Pint

        Re: Here come the groundhogs

        C2H5OH?

        Colloquially known as booze ...

    2. Steve Foster
      Facepalm

      Re: Here come the groundhogs

      Except you missed the bit about the existing name being toxic, seeing as how it's associated with the soon-to-be-ex parent organisation. So you need a completely new, whalesong-inspired corporate nothing-word rebrand (helpfully, that would fit with Sean Bean routinely getting killed off in whatever thing he's involved with :p).

      1. Soruk
        Coat

        Re: Here come the groundhogs

        How about a name that describes what it does, and is?

        Cellnet.

  4. MaxFacts

    Getting desperate

    According to GSMA they are now the 3rd most successful operator globally, makes you wonder what the first and second are like!

    https://www.gsmaintelligence.com/research/2016/09/mobile-operator-group-ranking-q2-2016/573/

  5. paulf Silver badge
    Unhappy

    Warning signs

    "Telefónica will also list its infrastructure business Telxius, which owns mobile masts and fibre-optic cables, on the stock market next year. However, the company intends to maintain a controlling stake."

    These partial flotations of a minority stake seem to end in tears. Does anyone remember FT floating a minority stake in their Orange mobile business in the early naughties to force the markets to attach what they thought was a more accurate higher value to the business?

    They may get a one off cash injection from selling the minority stake but it also means they can't access the cash flows as "profit" without paying tax on it and spend much more buying out the minority a few years later (as FT did with that Orange minority stake). There's nothing in it for the minority share holders either as they will never see their shares attain a premium in the price as a hostile acquisition simply isn't possible .

    If they need a short term cash infusion from a large fixed asset they'd be better placed to securitise a bunch of debt on it (I am not an accountant).

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