Hutchison Whampoa Plans To Sell A Third Of Merged Three-O2

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Three’s parent company offers 33 percent of the new company to investors in exchange for £3.1 billion to complete the deal

Five foreign investors will own a third of a combined Three-O2 if Hutchison Whampoa’s purchase of the former BT subsidiary is granted regulatory approval.

Hutchison finalised a £10.25 billion takeover deal with Telefonica for the purchase of O2 in March and plans to merge it with Three to create the UK’s largest mobile operator with 33 million customers.

The purchase will be partly funded by a bank facility of £6 billion and £3.1 billion generated from the five investors who will own an aggregate of 33 percent of the new combined business.

Foreign investment

Three Sing It KittyThe investors are Canada Pension Plan Investment Board, GIC of Singapore, Limpart Holdings Limited, a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA), CDPQ of Quebec, Canada and BTG Pactual of Brazil.

“It is an honour to have such a strong collection of the world’s largest and most sophisticated investors joining us as partners,” said Canning Fok, group managing director of Hutchison Whampoa. “The investors share our vision and belief in the value of creating a business with the necessary scale to enable us to compete effectively in the UK marketplace and to provide even better service and innovation using the largest and most resilient and advanced mobile network infrastructure in the country.”

Competition concerns

The investments are conditional on the takeover receiving regulatory approval from the European Commission, which may have concerns that any merger might impact competition in the UK.

Three, currently the UK’s smallest operator, has a history of disrupting the market with low prices, roaming offers and 4G at no extra cost. Should it become the largest operator, the need for such aggressive tactics would be less obvious.

However the European Commission has given its blessing to mergers in other countries in recent times. Indeed, Hutchison is in the process of combining Three and O2 in Ireland and it has been suggested the EC could focus on spectrum holdings and Mobile Virtual Network Operator (MVNO) access.

It is expected the deal could close in 2016.

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