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U.K.’s Three and O2 to marry

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Hutchison Whampoa Ltd, which is run by Asia’s richest man, Li Ka-shing, has announced that they will be purchasing the O2 mobile carrier from Telefonica for 10.25 billion pounds ($15.4 billion USD). Hutchison already owns the Three Mobile network in the U.K., so the merger of the two entities under one umbrella will create a new number one mobile operator in the country.

Hutchison’s announced purchase of O2 comes a few weeks after BT announced that it had entered into exclusive talks with EE, currently the largest mobile operator, to purchase the company as part of a strategy to create a company that provides fixed phone service, mobile phone service, and internet service.

Hutchison has started working on a strategy to revamp its mobile business in Europe where it already operates in six countries. Li has not been happy with the business though as returns have lagged behind other parts of Li’s portfolio of business ventures. This is not the first deal between Hutchison and Telefonica as Hutchison bought Telefonica’s Irish business last year. Hutchison is expected to work on revamping their Italian operations next.

For Telefonica, the company will use the proceeds to cut debt and focus more on reorganizing their business operations in Latin American countries. Telefonica believes there is more opportunity for growth in that part of the globe than in the more mature European economies, although Telefonica has made significant investments in the Spanish and German markets.

Although it remains to be seen how Britain’s telecommunications regulator Ofcom may view the deal, the markets have reacted positively with shares of both Telefonica and Hutchison rising on the news.

source: Reuters

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