Telefónica appears to abandon hope of selling O2

Telefónica has indicated in a statement it will no longer be selling off its O2 business unit following the European Commission’s decision to block Three’s attempts to acquire the brand.

The Three/O2 saga has been one of the more prominent news stories of 2016, as Hutchison Whampoa aimed to create the UK’s largest mobile operator through merging its current Three UK brand with the £10.25 billion O2. The future of the business unit remains unclear for the moment as Telefónica will wait for more stable market conditions for alternative strategies to be explored.

“Following the Significant Event published on May 11, 2016 in relation to the European Commission decision to prohibit the sale of Telefónica’s subsidiary in the UK (O2 UK) to Hutchison Whampoa Group, Telefónica informs that upon the publication of its 2016 first half results, Telefónica’s operations in the UK will no longer be reported as discontinued operations within Telefónica Group and all its assets and liabilities will cease to be reported as ‘held for sale’,” the company said in a statement.

The European Commission’s decision to block the acquisition of O2 was down to reduced competition and complications surrounding the two companies’ respective network sharing deals. The deal would have created a brand which had roughly 43% share of the UK market, making it the largest in the country, though it would have reduced the number of MNOs to three. The European Commission’s concern has been cited as fairness to the consumer, as competition would have been reduced.

While a sale is off the cards for the moment, the future of the business remains unclear however it will be reclassified back into full consolidation within Telefónica financial statements.

The team has also been in talks recently with various banks for plans of a flotation of O2, as the company was seemingly attempting to put some distance between the two organizations. According to the Financial Times, the preference was to float on the UK market, though the company was also investigating option surrounding a sale to a private equity firm.