London (Alliance News) - Britain could get a new leader in the mobile phone market if Hong Kong tycoon Li Ka-shing buys O2 and folds it into Three, the much smaller service provider he already owns.
Li's Hutchison Whampoa said Friday it was in exclusive talks with O2 owner Telefonica of Spain and a 10-billion-pound (15-billion-dollar) deal was in the making.
Telefonica bought O2 from formerly state-owned telecommunications provider BT for 17.7 billion pounds in 2005. It said it "continues to lead the European consolidation process."
Last month Britain's BT announced a cash-and-shares deal worth 12.5 billion pounds to acquire mobile provider EE so customers could be offered a package of mobile, fixed-line, broadband and television.
EE owners Deutsche Telekom of Germany and Orange of France would take 12% and 4% respectively in BT if the deal goes through.
With 24.5 million customers, EE holds a third of the mobile market. O2 holds 28%, while Three has 8.4%. Britain's other provider is Vodaphone.
The shake-out, which will see three independent providers rather than four, is being driven by what the industry calls "quad play" - companies competing with each other to sell customers complete telecommunications packages rather than individual telecommunications services.
Virgin Media was the first to offer a quad-play package with its mobile phone offering using EE's network.
The Hutchison deal is likely to need approval from the European Commission in Brussels. Ofcom, the British government's telecommunications watchdog, will advise the commission on its competition implications.
Ofcom has previously said competition would better be served by having four operators than three.
"The biggest concern will be the impact on consumers, particularly at the lower end of the market," Matthew Howett, an analyst with telecommunications consultancy Ovum, said in a statement.
"While consolidation is being encouraged and similar deals have been approved in Ireland and Germany, sceptics are likely to point to what is currently happening in Austria, where Three also acquired a rival. Recent research suggests that since that transaction, prices have been rising - and the hardest hit have been customers on low-cost monthly tariffs," he added.
Copyright dpa
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