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BT admits to talks over buying O2 mobile network

Getting back into mobile might make a lot of sense for the telecoms giant, says analyst.
Written by Colin Barker, Contributor
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BT is in talks with Telefonica about buying its O2 mobile network, a move which could see a major shake-up in the fixed and mobile telecoms markets in the UK.

Yesterday BT confirmed it has received expressions of interest about two UK mobile network operators, of which one is O2, "about a possible transaction in which BT would acquire their UK mobile business". BT went on to note that the discussions "are at a highly preliminary stage and there can be no certainty that any transaction will occur".

The second mobile network mentioned is believed to be EE, the company formed from the mobile businesses of Orange and T-Mobile.

While BT dominates the UK’s broadband market with a 31 percent market share — followed by Virgin Media and Sky with 20 percent each, and TalkTalk with 15 percent — the company has for some time been looking to expand its position in the communications market. Buying the O2 mobile business could be just the way to do it.

BT used to have a major share of the mobile market through Cellnet, the forerunner of O2, but that business was spun off in 2001. Originally, Cellnet was a 60/40 joint venture between BT and Securicor (now G4S).

"BT is in the middle of the pack in terms of growing or fading,” said Gartner research director Charlotte Patrick. “Whether they buy O2 or EE, the move makes sense. They are ideally positioned to expand and now is a good time for them to do that.”

BT needs that quad-play: broadband internet access, television, telephone, and wireless, she said.  "Most of the operators in that area are either fixed or mobile, not both, so this will make [BT] stronger within retails sales,” she said.  As Patrick pointed out, most operators are strong in either fixed line or mobile but not both.

"Without a retail offering, it is more difficult," Patrick said. "Now they could have both."

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