3 to buy O2 Ireland as consolidation drive continues

Hutchison Whampoa, which operates the 3 brand in Europe, has announced that it is to buy Telefónica’s Irish mobile operation O2 for €780m, with a further €70m payable if a number of agreed financial targets are hit. It is the second consolidatory move made by Hutchison in recent months, following the acquisition of Orange Austria, which was completed at the end of 2012.

If granted approval, the deal will take 3 from a relatively distant fourth place in the Irish market to second position, behind Vodafone.

Ireland is a competitive market, with four operators battling for 5.25 million subscriptions at the end of the first quarter of this year, according to Informa’s WCIS. Of the four, 3 sits in last place with 475,020 customers. Second-placed O2 had 1.53 million customers at the end of March and the combined operation would have two million active subscribers, Hutchison said, close behind Vodafone, which had 2.16 million at end 1Q13.

The transaction would leave Meteor Communications, owned by former state monopoly Eircom, off the pace in third position. At the end of the first quarter Meteor had 1.08 million users, according to Informa.

3 holds fourth place in most of the other European markets in its portfolio, Denmark, Sweden, Italy and the UK. In 2012 Hutchison bought Orange Austria, consolidating the market to three operators, although the deal was not enough to take it into second place. If this latest deal is successful Ireland will be the only market in which it is not cast as a challenger.

Earlier this year Hutchison was in talks with Telecom Italia about a potential merger in the Italian market but the deal looks to have stalled, with disputes over valuations among the obstacles. It has not been formally ruled out, however. In the UK 3 co-owns the MBNL network with EE.

In Sweden and Denmark—smaller markets, with less blue sky between three and its competitors—strong regional operators like TeliaSonera and Telenor would seem unlikely candidates for consolidation.

Hutchison might find more synergies with Tele2 in Sweden, which also operates a fixed network in Austria and has talked of returning to that market as an MVNO, having sold its previous MVNO operation in 2007.