The airwaves have been awash of late with UK telecom takeover stories. Firstly Telefonica's UK mobile phone operator arm O2 is reportedly to be sold to Hong Kong billionaire Li Ka Shing's Hutchison Whampoa, the owner of the Three mobile phone network, for £10bn.
1. UK Mobile Operators' Market Share
O2 plus Three's combined UK mobile market share would rise to 40% from Three's current 12% share, easily becoming the UK's largest mobile operator (Figure 1a and b).
Figure 1a. UK Mobile Operators' Market Share: Current situation
Source: Jeffries Investment Bank
Figure 1b. UK Mobile Operators' Market Share: If O2 and Three are Merged
Source: Jeffries Investment Bank
Secondly, both Deutsche Telekom and Orange are potentially ready to sell their combined UK mobile operation EE to BT, who is looking to buy its way back into the UK mobile network business some 13 years after selling its mobile arm BT Cellnet, which eventually turned into O2.
BT's potential purchase of EE fits with the predictions made by the credit ratings firm Standard & Poors, who expect to see more fixed-mobile combinations in the UK telecoms market as key players seek both revenue and cost synergies.
Vodafone the wallflower at the mobile phone party?
Looking at the four UK mobile phone incumbents, the only operator so far not mentioned in this merger and acquisition merry-go-round is the number three player ranked by customers, Vodafone.
Believe it or not, even at a total market capitalisation of nearly £64bn currently, mobile phone juggernaut Vodafone (LON:VOD) has been talked of as a potential acquisition target in the global telecoms sector, ever since it agreed to sell:
- its 50% share of US mobile operator Verizon Wireless back to Verizon for £54bn
- its 44% share in French mobile operator SFR back to majority holder Vivendi.
Who could afford to buy Vodafone? Two much larger suitors have been identified in the recent past: US telecoms giant AT&T and the leading Chinese mobile phone network, China Mobile. In terms both of market capitalisation and annual income generated, these two telecoms companies dwarf Vodafone (Figure 2a and b).
Figure 2a. 2b. Vodafone is dwarfed by China Mobile, AT&T
Source: Finviz, Stockopedia
In fact, AT&T and China Mobile are…
