Telefonica Raises the Stakes, Bids US $31.6B for O2

Telefonica Raises the Stakes, Bids US $31.6B for O2


It seems that Telefonica (Spain), the world’s fifth-largest telecoms firm by market value, really really wants O2 (UK), currently Europe’s sixth-largest mobile phone company. It has outbid O2’s own management by offering a cash bid of US$31.6 billion.

Telefonica, in what is now being touted as ‘Europe’s highest all-cash bid on record’ offered 200 pence per share, a 22% premium to the European firm’s closing share price on Friday (28 Oct). As a result, O2’s shares increased to more than 25% to a record 206-3/4p. For Telefonica, acquiring O2 signals many things. For one, it would enable it to (finally) enter the UK market segment. It will also be able to re-enter the German market which it left in 2002 after failed plans of starting up a mobile operation there.

Expected to enter the picture soon is Deutsche Telekom of Germany which has been long rumored to be wooing O2 as well. According to Deutsche Bank analyst Gareth Jenkins, Deutsche Telekom could pay even more for O2 with a cash-and-share bid. Dutch telecoms giant KPN however claims that it will not post a counter-bid after its bid was spurned last August 2005.