Nearly a decade after agreeing to sell off its U.K. cellular network business, former monopoly provider BT Group plc on Monday, Nov. 24, confirmed it's looking to get back in the game, possibly by buying back the company or acquiring another U.K. mobile network operator.
Both BT and Spain's Telefónica SA on Monday said they were in talks about Telefónica's O2 U.K. business following an El Confidencial report that the Spanish telecom would get 20% of BT in exchange for the O2 business.
"We continue to develop our own plans for providing enhanced mobile services to business and consumer customers, in line with our previous announcements. We remain confident of delivering on these plans and have also been exploring ways of accelerating them, including assessing the merits of an acquisition of a mobile network operator in the U.K.," BT said.
European telecoms are scrambling to offer customers quad-play services – broadband, entertainment content and fixed-line and wireless phone services – sparking widespread consolidation. BT is already the U.K.'s biggest broadband provider because of its history as the legacy phone company and will soon begin reselling cellular services from Everything, Everywhere Ltd. to offer quad play.
"Telefónica informs that although conversations with British Telecom are taking place, those are at a highly preliminary stage and there can be no certainty that any transaction may occur with such company," Telefónica said.
Everything Everywhere, better known as EE, is a cellular joint venture of Deutsche Telekom AG and Orange SA and has been a perennial target of takeover speculation. BT on Monday said it was talking not only to Telefónica but also another, unnamed potential target, widely speculated to be EE.
BT sold its cellular business to Telefónica in 2005 for £17.7 billion ($27.8 billion) in what was seen as a tremendous error moments before the explosion in smartphones. The sale left BT as the only once-monopoly European provider without its own cellphone wing though the U.K. market quickly became overcrowded – both Orange, nee France Telecom, and Deutsche Telekom wanted out but settled for the EE joint venture instead.
Buying a local cellular network is likely to raise hackles in the U.K., where rivals are already concerned about BT's strong position in broadband. The U.K. Competitive Telecommunications Association this weekend criticized BT's near-monopoly in business broadband and pushed phone regulator Ofcom to allow competitors to use BT ducts to lay their own networks.
The association is made up of BT rivals such as Vodafone Group plc and EE. Vodafone is likely to be critical of a BT/O2 or BT/EE link since it already resells BT broadband for its own domestic quad-play product.
Telefónica has played a pivotal role in the quad-play-based reshaping of the European phone landscape. Last year it sold its U.K. broadband operations to British Sky Broadcasting Group plc for £200 million in a sign it was also losing interest in that market – it also paid €8.6 billion earlier this year for the German E-Plus cellular unit of Royal KPN NV to become Germany's biggest cellular provider.
BT shares had gained 3.3%, or 12.40 pence, to 392.40 pence by around mid-day in London, equating to a market value of £31.8 billion. In Madrid Telefónica edged up less than 1% to €12.58, translating into a market value of about €57.3 billion.