November 20, 2014 / 6:15 PM / 5 years ago

Telefonica does not rule out a sale of O2 in the UK

BARCELONA (Reuters) - Telefonica would have to consider its options regarding its UK presence, including a sale of the O2 business, if more of the market moves to bundling fixed and mobile telecom services, a top executive said on Thursday.

A man speaks on the phone as he walks past the O2 flagship store in Berlin October 16, 2012. REUTERS/Thomas Peter

Telefonica, which bought O2 in 2006, has said the UK business remains core but has not ruled out asset sales to meet a year-end debt target of below 43 billion euros (34.37 billion pounds).

“If the market goes convergent then we will need to evaluate our options,” Telefonica’s chief operating officer, Jose Maria Alvarez-Pallete, told the Morgan Stanley Technology, Media and Telecom Conference in Barcelona, when asked about a potential sale of its O2 business in the UK.

O2, which trails EE in Britain, was performing well, Alvarez-Pallete said, with average revenue per user growing and churn rates on customer retention lower.

However, the mobile market could be shaken up by the expected return next year of BT, the original owner of O2, and a bigger push by the likes of cable firm Virgin Media into making bundled offers of TV, fixed line broadband and mobile services.

“In the landscape as it stands today we are in good shape,” Alvarez-Pallete said. “But the position taken by BT when and if it launches in mobile will be a key event. Virgin and others already have converged offers, but we don’t see a major appetite from consumers. So we’ll see how that evolves.”

Vodafone said last week it would offer fixed-line broadband and TV next year, while EE also offers broadband, which it wholesales from BT, and recently announced a TV product.

O2 has no equivalent offer after selling its fixed line and broadband business to pay-TV company Sky last year. However, UK broadband and TV services provider TalkTalk said on Monday it had signed a new agreement to use the O2 network to provide mobile phone services to its customers, including for the first time 4G mobile broadband.

Stephane Richard, chief executive of EE co-owner Orange said in Barcelona he was also monitoring the take-up of fixed and mobile offers in Britain.

“Looking to the future, we have strategic issues around convergence,” he said, adding that EE could respond with partnerships with broadband companies or other moves.

Writing by Julien Toyer and Paul Sandle; Editing by Greg Mahlich

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