Telefonica  - O2 Takeover Agreed

The Spanish telecommunications company Telefónica today announced an agreed £17.7bn takeover (€28bn approx) of O2, to be paid in cash.

Telefónica has substantial interests in Spain and South and Central America, plus Morocco and Czech Republic. O2's cellular business is in the UK, Ireland, the Isle of Man and a large presence in Germany.

This merger will create an operator with net revenues of around €40bn, which compares well in size terms to Vodafone's €55bn (the world's largest mobile telco). The merged Telefónica-O2 operation should have some substantial market influence.

Unlike some recent takeover rumours (for example Deutsche Telecom and KPN), an O2-Telefónica merger will be unlikely to run into regulatory difficulties as there is virtually no overlap in the businesses. It will also give Telefónica a chance to break out of Iberian and Latin American markets where they are already the largest player.

It is understood that O2's branding will remain and it will continue to be based in the UK. O2 has been seen as a target for some time because of its relatively small size and overall profitability.