Hutchison Whampoa acquires Telefonica’s Irish business for €780 mn

Global multinational conglomerate Hutchison Whampoa Ltd's wireless communication unit Three yesterday agreed to buy Spanish telecom giant Telefonica's O2 Irish business for approximately €780 million ($1 billion), significantly improving its strength to take on arch rival Vodafone in the Irish market.

With the acquisition, Three will increase its market share to 37.5 per cent and have a customer base of around 2 million, bringing it close to Vodafone who is the market leader holding over 39.5 per cent of the Irish mobile communication market.

Under the terms of the deal, an additional €70 million is payable to O2 depending on achieving agreed financial targets, Hutchison said in a statement.

The two companies had combined revenues of €803 million in 2012. Three's revenue was €174m in 2012 on a standalone basis.

The deal follows reports on Vodafone Group Plc's proposed $10.1-billion acquisition of Kabel Deutschland Holding AG, Germany's largest cable operator. (See: Vodafone offers $10.1 bn for Germany's Kabel Deutschland)

O2 operates 2G and 3G networks in Ireland and recently acquired the spectrum required to roll out a nationwide 4G network. The mobile operator is in the second position with a market share of around 28.5 per cent. It has a network of 70 retail stores and employs around 850 people in the country.

Three Ireland, launched in 2005, occupies the fourth position in the country with a market share of just over 9 per cent, after Vodafone, O2 and eircom. It has invested over €800 million in the country's advanced communication network and operates over 50 stores in the country.

Commenting on the acquisition Robert Finnegan, CEO of Three Ireland said that O2's business is complementary to Three and the company has been looking at ways to grow its market share, and acquisition was the natural next step.

''Our combined 37.5-per cent market share gives us the scale and financial strength to compete even more aggressively in the market to the benefit of consumers.  Our ability to invest coupled with the combined subscriber base will create new competitive dynamics in the Irish telecoms market,'' Finnegan said.

Through the acquisition, Three aims to become the number one operator in the Irish mobile market with it business plans to invest strongly in creating a state of the art network including 4G/LTE over the next number of years.

This deal will allow the company to make significant investment in building a state of the art network. 

The combined network will be beneficial to customers outside the major urban areas as the increased scale will allow Three to extend its rural network investment programme beyond 2014, the statement said.

The transaction is subject to approval from the European competition authorities.

Madrid-based Telefonica is a global telecom giant with operations in Europe, Latin America and Asia.

In a separate statement, the debt-laden Spanish telecom company said that the sale of O2 is in line with the company's ongoing policy of proactive management of its assets portfolio with the aim of increasing the company's financial stability. 

Telefonica gained control of O2 Ireland in 2005 as part of its $31-billion acquisition of O2 division from London-based British Telecom.

In recent years, the company has been selling assets to reduce its debt burden with the goal of bringing the net debt below €47 billion in 2013.

In April, Telefonica agreed to sell its Central American assets to Guatemala's CMI for $500 million and in 2012, the company disposed off its Atento call centre to US private equity firm Bain Capital for $1.3 billion, China Unicom stake for $1.4 billion and its UK broadband and fixed telephony business to BSkyB for $270 million.

Hong Kong-based Hutchison Whampoa has diverse businesses including port, retailing, property development, energy, infrastructure and telecommunication with presence in 52 countries.

Three, which is 100 per cent owned by HWL, operates 3G services in Ireland, the UK, Austria, Denmark, Hong Kong, Italy, Macau and Sweden and has over 22 million customers in Europe.