BT in Talks to Buy Telefonica's U.K. Unit -- 2nd U

BT in Talks to Buy Telefonica's U.K. Unit -- 2nd Update
Date : 11/24/2014 @ 7:00AM
Source : Dow Jones News
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BT in Talks to Buy Telefonica's U.K. Unit -- 2nd Update
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Today : Monday 24 November 2014
Click Here for more Orange Charts.By Simon Zekaria LONDON-- BT Group PLC on Monday said it is in talks to buy Telefonica SA's U.K. mobile business, 02, as the British telecom incumbent lays out its ambitions to be a fully-fledged wireless operator in the U.K.'s converging telecom market.
BT is already planning a return to consumer mobile next year, but said it is exploring ways of "accelerating" its plans, which includes assessing the merits of an acquisition of a mobile network operator in the U.K.
The 168-year-old London-based group, responding to recent media reports, said it had received "expressions of interest" from shareholders in two U.K. mobile network operators, of which one is O2, about a possible transaction in which BT would acquire its U.K. mobile business.
O2 is one of the big four U.K. wireless operators, along with EE--a joint venture between Orange SA and Deutsche Telekom AG, Vodafone Group PLC and Hutchison Whampoa Ltd.'s Three.
The other U.K. network operator being offered to BT is EE, according to a person familiar with the matter. EE declined to comment.
"All discussions [with Telefónica] are at a highly preliminary stage and there can be no certainty that any transaction will occur," BT said in a statement.
BT confirmed the talks after a report in the Spanish media said Telefónica is negotiating taking a 20% stake in BT in exchange for O2. BT wasn't available for further comment.
Telefónica also confirmed the talks, saying they were at a "very preliminary phase."
A deal for O2 would see BT reacquire a wireless business it demerged in 2001, called BT Cellnet. Telefónica bought O2 in 2005 for GBP17.7 billion ($27.7 billion).
In midmorning London trading, BT shares rose 2.9% to 390.9 pence in a largely unchanged overall market.
BT offers retail consumers so-called triple-play services of fixed phone, Internet broadband and television, and competes for subscribers with rivals such as Liberty Global PLC's cable operator Virgin Media and pay-TV giant Sky PLC. Next year, through a leasing deal with EE's network, it plans to launch a consumer mobile offer to supplement its existing business service .
Last week, Telefónica said it would consider all strategic choices for its U.K. operations, including a possible sale, should Britain's telecom operators continue to add fixed-line assets and television content to their wireless services.
"If the U.K. is to be a convergent market, then we need to evaluate all possibilities," said Telefónica's Chief Operating Officer José María Álvarez-Pallete, speaking at the Morgan Stanley telecom, media and technology conference in Barcelona.
Unlike countries such as Spain and Germany, U.K. telecom operators have yet to fully embrace so-called quadruple play offers of fixed telephony, mobile, broadband Internet and television . But rivals Vodafone and EE are moving into the space. Virgin Media and telecom group TalkTalk also participate in "quad" play.
European telecom operators are eager to move into broadband and media services outside their core telephony business to jump-start flagging revenues across the continent's anemic wireless markets. Bundled services are also perceived to boost subscriber revenue and increasing customer loyalty.
Analysts at Barclays said European telecom operators are positioning themselves for bold market moves as they are buoyed by more favorable sentiment.
"Following years of relentless earnings pressure driven by macro, competition, regulation and technology, we believe the tide is finally turning positive, supporting a constructive view on the industry," said analyst Maurice Patrick.