December 11, 2014 / 6:52 PM / 4 years ago

Exclusive: Telefonica boss heads to London as BT mobile talks heat up

LONDON/MADRID (Reuters) - The battle to become the mobile partner of BT intensified on Thursday as the chairman of O2’s Spanish owner, Telefonica, flew to London and rival suitor EE’s owners indicated they were willing to offer more attractive terms to seal a deal.

The BT communication tower is seen from Primrose Hill in London April 9, 2013. REUTERS/Suzanne Plunkett

BT has been in talks with Telefonica and EE’s owners, Orange and Deutsche Telekom for nearly a month about a deal to buy one of the mobile operators, putting the British telecom firm in an unusually strong position to negotiate a deal.

People familiar with the situation have said Telefonica is willing to agree a deal which includes taking some shares in BT and other sources familiar with the situation said on Thursday Orange and Deutsche are also now open to accepting BT stock.

Three sources with direct knowledge of the matter said BT was expected to choose between the two firms by early next week, with an announcement possibly coming earlier than that. Telefonica’s chairman, Cesar Alierta, was flying to London on Thursday afternoon to help lobby for his side.

“BT is not expected to take much longer to choose between the two,” one source said. “You can reasonably expect an announcement to be made by early next week, maybe as soon as this Friday.”

A deal with Telefonica would return O2 to its original owner, as it was demerged from a heavily indebted BT via a share flotation in 2001 and subsequently bought by Telefonica in early 2006.

A return to the mobile market now would give BT a strong position as the UK consumer telecoms market converges with single operators offering “multi-play” packages of fixed and mobile broadband, telephony and pay-TV services.

But among the issues the BT board has to weigh up is whether it would rather have Telefonica, or France’s Orange and Germany’s Deutsche Telekom on its shareholder register.

Telefonica has had a famously difficult relationship with a previous partner, Telecom Italia, where it has been its largest shareholder but is now in a gradual process of selling out.

Telefonica is also seen as the most aggressive among the three companies and its ambition to consolidate the markets where it operates could in the long run lead them to eye more control over BT, said one of the sources.

Orange and Deutsche have also had a sometimes strained relationship in running EE.

Symptomatic of the heightened state of merger activity in the telecoms industry as services converge, Hutchison’s 3 Group is expected to shortly line up a bid for whichever mobile group misses out on a deal with BT, two other sources said.

BT, Telefonica, Orange and Deutsche Telekom all declined to comment.

Additional reporting by Julien Toyer in Madrid, Kate Holton in London, Leila Abboud in Paris and Harro Ten wolde in Frankfurt; Editing by Keith Weir, Greg Mahlich

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