Three could block BT with counter bids for O2 or EE

Three’s parent company Hutchison-Whampoa may outbid BT bid for O2 or EE. 

Sources ‘familiar with the matter’ told Reuters that Hutchison is working with an advisory boutique to decide how much to put on the table for the leading 4G network – EE – and the second market leader, O2. 

BT is thought to be interested in merging with either network, which would see it becoming a quad play company for the first time.  

Last week it was revealed that BT was talking to both O2 and EE. The nature of these talks have not been made public but BT, O2 and EE have stressed that the talks are ‘very early’ and ‘highly preliminary.’

Three in the UK has yet to comment on this latest speculation. According to the latest financials, Hutchison also has deeper pockets BT, which has also spent millions on Premier League broadcast rights for BT Sport. 

Hutchison buying EE could leave the field open for BT to snap up O2. Analysts said O2 valued at £9.4 billion makes it a little more affordable for BT in comparison to EE that has been valued at 11 billion.

Given BT’s dominant position in the fixed-line market place, telecoms regulator Ofcom might not allow it to fully merge with EE. 

As EE is also a fixed-line ISP with just under 800,000 subscribers, a merger of both companies would see BT – with 7.4 million broadband customers – increase its already large lead. 

BT’s nearest rival in terms of broadband subscriber size is Sky, with just 5.3 million customers, followed by Virgin Media with 4.5 million. TalkTalk has 4.2 million, sitting above fifth placer EE. 

From a 4G spectrum perspective, a BT bid for O2 arguably makes more sense as BT owns licences for the higher 2.6GHz radio frequencies – something O2 didn’t snap up in the 2013 bidding war. 

O2 owns slices of the 800MHz, 900MHz and 1800MHz bands. EE has fingers in the 800MHz, 1800MHz and 2.6GHz bands pies, meaning its better placed than O2 to reach people in distant rural areas and clustered, urban centres. 

As O2 also sold its fixed line broadband services to Sky in 2013, buying it presents less of a potential regulatory stumbling block for BT.