Hong Kong tycoon Li Ka-shing’s (李嘉誠) Hutchison Whampoa Ltd (和記黃埔) yesterday said it is in “exclusive negotiations” to buy mobile phone giant O2 for as much as US$15.4 billion, in a deal that would create Britain’s biggest mobile phone group.
Hutchison confirmed in a statement that it was in talks to buy the company from Spain’s Telefonica SA for ￡9.25 billion (US$13.88 billion), with a deferred further payment of up to ￡1 billion after completion of the deal.
It said the deal was subject to due diligence and regulatory approvals, adding: “The negotiations may or may not result in any transaction.”
Shares of Hutchison, which had been suspended for a short time yesterday morning as reports swirled over the sale, were up 2.5 percent by 3:25pm in Hong Kong. Hutchison already owns Britain’s Three mobile phone network and the purchase of O2 would create the country’s largest mobile company.
The move comes after Hong Kong investment icon Li — a former plastic-flower seller who is now Asia’s richest man — announced this month a US$24 billion revamp of his vast business empire, and is the latest in a string of purchases.
“Li Ka-shing likes to buy European assets — one of the reasons is they are relatively cheap,” Core Pacific-Yamaichi International Hong Kong Ltd (京華山一) financial analyst Kevin Tam (譚思晉) said.
The potential acquisition of O2 is part of Li’s quest for international diversification and steady growth, Tam told reporters.
“Buying a telecoms company can generate a stable growing cashflow... The capital expenditure requirement is not very demanding and there isn’t much fluctuation. Stability is the key,” he said.
British telecoms giant BT had said in November last year that it was in preliminary talks to buy back O2 — its former domestic mobile phone division — from Telefonica.
However, last month it then announced that it had entered exclusive talks with the owners of EE, another British mobile phone operator, in a deal potentially worth ￡12.5 billion.
If the O2 merger with Three goes ahead, it would leave Britain with three mobile phone networks, down from four, a move some experts say could lead to price hikes owing to a lack of competition.
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