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Tesco considers buy-out of O2 from mobile joint venture

Tesco is seeking to consolidate its presence in the UK mobile market with a buy-out of O2’s stake in their 50-50 Tesco Mobile joint venture for around £300m.

Such a move would free up Tesco to expand the non-grocery side of its business as a period of consolidation shakes up the mobile market with O2 itself the subject of a takeover bid by Hong Kong giant Hutchison, owner of 3.

Hutchison is keen for O2 to offload the stake in order to smooth the passage of its own takeover bid amidst European concerns at reduced competition in the UK market and is likely to guarantee long term access to a tenth of the capacity on the merged 3/O2 network as part of any deal.

According to The Telegraph the European Commission has modelled price increases of six per cent should 3 and O2 merge but this figure would fall to one per cent in the advent of a fully independent Tesco Mobile entering the marketplace.

Commenting on the rumours a Tesco spokesman said: “Tesco is an interested party in the merger review process.

“It is important that any landscape created by the merger process allows challenger brands, such as Tesco Mobile, to deliver the best possible services for UK customers, and champions consumer choice.”

Tesco Mobile currently has 4.5m customers and is well placed to mount an aggressive push on the budget end of the market should its acquisition go through.

John Glenday

John Glenday is responsible for compiling The Drum's daily morning bulletin and ensuring that overnight breaking news is covered while you're still brushing your teeth. Can also make a mean cup of tea.

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