Telefónica and Liberty Global reached an agreement in early May last year to merge their UK businesses and create the market-leading fixed and mobile operator in the country. According to the UK Competition and Markets Authority (CMA), the combination of Telefónica subsidiary and Virgin could lead to higher prices for wholesale fiber and mobile services. Thus they announced an investigation into the merger and its possible consequences before giving the go-ahead to the deal.
The European Commission authorise the merger in Holland between Tele2 and Deutsche Telekom without preconditions , which drove the European teleco sector yesterday. Until now the Commission had shown itself radically opposed to allowing corporate operations which imply a reduction from four to three in the number of operators in a country.
The UK Court of Appeal has dismissed a demand from Three which blocked the new frequencies auction (planned for Autumn 2017), in turn blocking Telefonica’s share sale of O2. This is positive news for Telefónica as it means that it eliminates a practical hurdle for the company to be able to carry out the O2 share sale in the UK, raising funds to cut its debt.
Telefónica is continuing with its plans for cutting group debt – estimated at 50 billion euros – by divesting stakes in some of its subsidiaries and ruling out any major new acquisitions. On the one hand, the company is still preparing to list a minority stake in its UK mobile subsidiary O2 towards year-end, on the other they are considering to sell Telefonica Argentina.
Telefonica’s net profit rose 42.2% to 779 million euros in the first quarter of 2017 from a year earlier. The 2016 results were reformulated mid-last year after the group decided to stop presenting its UK subsidiary O2 as a discontinued operation. Revenues from its Brazil and Latin American operations were the main earnings driver.
This week Telefonica has been one of the main protagonists of the Spanish stock market. Firstly, it confirmed to bourse regulator CNMV that it will launch an IPO of between 25% and 50% of its infrastructure affiliate Telxius. And secondly, that it is finalising the partial sale of its UK subsidiary O2.
If Telefonica approves the choice of current CEO José María Álvarez-Pallete to replace Cesar Alierta as Chairman, he will be the first Executive Chairman not to be appointed by the Spanish government. Alvarez-Pallete will face two main challenges: securing European Commission approval for the sale of O2 and dealing with the weakness of the LatAm economies, particularly Brazil.
The sale of Telefonica’s O2 to Hong Kong telecoms giant Hutchison remains up in the air. And the European Commission (EC), which has the final responsibility for the outcome of the transaction, is still being a dog in a manger, under pressure from the UK authorities.
The Corner | March 27, 2015 | The sale by Telefónica of O2 UK will allow the company to focus attention on its growing operation in Germany. Telefonica will now go toe-to-toe with Vodafone and Deutsche Telecom, as the three mobile giants vie for supremacy in the eurozone’s largest economy.
LONDON/MADRID | Telefonica UK selected as preferred communications service provider for Central and Southern regions in UK Smart Meter Implementation Programme.