It's official: Three is in exclusive talks to buy O2 UK for up to £10.25bn

A few days ago, a report claimed that UK network Three was preparing to submit a takeover bid for O2. Today, both Three's parent company, Hutchison Whampoa, and the current owner of O2, Spanish communications giant Telefónica, have confirmed that they are in exclusive talks in the hopes of agreeing a deal worth £10.25bn ($15.34bn).

Ronan Dunne, CEO of O2 UK said today that the deal would create a "UK customer champion" - interesting phrasing, given that last year, O2 defied new consumer-friendly guidelines from industry regulator Ofcom, changing its terms and conditions so that it could continue to increase prices mid-contract.

Telefónica has been seeking an exit from the UK market for some time, and had also considered selling O2 to BT, the country's largest fixed line and broadband provider. However, BT instead entered exclusive talks to acquire EE, currently the UK's largest mobile network, including the EE, T-Mobile and Orange brands.

But if Three's takeover of O2 goes ahead, it will leapfrog BT-EE to become the UK's biggest carrier by some margin. Three currently has around 7.5 million customers in the UK, but this figure will explode to well over 31 million if it gobbles up O2. You can certainly expect Ofcom to get involved before the deal is approved, in order to assess the impact on the market of these huge mergers.

At this early stage, many questions remain unanswered, including those surrounding the issue of what the new merged operator will be called. It's possible that Hutchison Whampoa will continue to license the O2 brand from Telefónica after the acquisition is complete, but given Three's considerable presence in the UK market, it seems more likely that the company will want to consolidate operations under its own brand.

Still, it may be some time before the deal is even agreed, and it's anyone's guess how long Ofcom's assessments will take. It will certainly be a while longer before customers are impacted by any potential changes - such as new price plans, retail stores, network expansion, and the like - so if you're feeling a bit uncertain about the prospect of O2 being eaten up by Three, you've got plenty of time to consider your next move.

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