Telefonica expands as European phone industry consolidates
Spanish-based Telefonica SA, the #5 telecommunications company in the world, announced it will buy out UK-based cell phone company O2 PLC. The deal is a major one, for around $31.4 billion. O2, which has operations in the UK, Ireland, and Germany, was also being courted by Germany's Deutsche Telekom and the Netherlands' KPN NV.
O2 was spun off from UK phone utility BT Group (British Telecom) in 2001. It has over 24 million customers. It is part of a very competitive UK cellphone market, competing against Vodafone, Orange (a division of France Telecom) and T-Mobile (a division of Deutsche Telekom).
Telefonica has extensive holdings in Latin America. Last year its Telefonica Moviles subsidiary acquired Bell South's cellular operations in Latin America. As a Wall Street Journal article notes ("Telefonica to Buy O2 For $31.39 Billion", 10/31/2005), growing cell phone operations "because bigger cellphone companies pay manufacturers less for handsets that they then sell to their customers."
About 20% of Telefonica operations are in Spain, with s small presence in Morocco (4%). 32% of the companies revenue comes from Brazil. The rest comes from throughout Latin America, in Mexico, Nicaragua, Guatemala, El Salvador, Panama, Colombia, Peru, Ecuador, Venezuela, Argentina, Chile, and Uruguay.
All this is a part of a continuing contracting in the European phone industry with plenty of multibillion dollar deals, as seen here and here, for example. The WSJ article notes:
After working their way out from under mountains of debt incurred in the late 1990s, many European telecommunications companies are flush with cash, prompting the larger ones such as Telefonica to look for deals and making smaller ones attractive acquisition targets.
In fact, Telefonica just bought a controlling share of Cesky Telecom, the leading provider of fixed and mobile telephones in the Czech Republic. The price was $3.5 billion. Rival Vodafone earlier this year had acquired Czech cellular provider Oskar.
Leading cell phone companies
