The FTSE 100 could be saying hello to a familiar face if competition authorities don’t put a spanner in the works. Three owner CK Hutchison, which is in the process of combining its network with O2, said it was considering floating the new business once the merger is complete.
Canning Fok, the Hong-Kong firm’s co-chief executive, told the FT that secondary investors in the deal (which include the Canadian Pension Plan and Singapore’s GIC) would be looking for liquidity in their new asset, and that an IPO would be one way of achieving that.
O2 was a listed company after being split from BT in 2001 until Spain’s Telefonica acquired it in 2006. If CK Hutchison decides to float the new company in London then it will most likely return to the top tier of the stock market. O2 and Three have a reported combined enterprise value of around £15bn, well above the approximately £3.5bn minimum market cap currently required to be in the FTSE 100. Of course, a listing in Asia or elsewhere could be possible too.
Fok also hinted that the newly combined group could keep the O2 name, which he described as a ‘strong brand’. That would make sense, as O2 is along-established big beast in British mobile telecoms, whereas Three has always been a smaller player. That logic didn’t prevent France Télécom and Deutsche Telekom from killing off Orange and replacing it with the decidedly less captivating EE brand though, so we’ll have to wait and see. (EE looks like it is heading for the chop anyway, if BT gets its way).
It has been speculated that the tie-up could be hampered by competition authorities after a similar deal was blocked in Denmark earlier this month, but Fok seems confident the merger will go ahead. ‘This market is full of competition,’ he said. ‘We have done this exercise in Austria and Ireland and we will come up with a solution in which everyone is comfortable.’
Even if all does go smoothly, the new company could have a big fight on its hands. Unlike most of their competitors, O2 and Three have decided against going down the ‘quad-play' route of offering TV, broadband, and home phone services as well as mobile. Three chief exec David Dyson, who will lead the new company, has shown little appetite to change that. But if BT, Vodafone, Sky and others can draw in the crowds with their cut-price quad bundles, he might be forced to change his mind.