The UK fixed incumbent is in talks with both EE and O2 but now faces a rival bid from Hutchison Whampoa, the owner of 3, the UK’s smallest operator, according to Reuters.
The Hutchison schedule is to table a bid before year-end, while BT is already locked in discussions with the two operators.
However, Hutchison and Telefonica have form in the sense that 3 Ireland and its O2 peer merged earlier this year.
And the two have a level of cooperation in place with an existing network sharing deal in the UK.
Telefonica thinks bigger?
But it might be that Telefonica’s head has been turned to a wider ambition, at least geographically.
Its talks with BT have moved beyond the original outline: the sale of O2 to BT with the Spanish operator taking a 20 per cent stake in the merged entity.
“Telefonica seeks a global alliance with BT,” said Cesar Alierta, Telefonica’s chairman, speaking in the UK to the Spanish Chamber of Commerce. His comments were reported by Expansion.
While emphasising talks are “fluid”, Alierta is clearly thinking wider than the UK, or even Europe.
“It is clear that BT and Telefonica are highly complementary in the UK, but there are synergies in other countries,” said Alierta.
Telefonica’s interests outside its domestic market are more consumer-oriented than BT’s. In addition to O2 in the UK, they include fixed and mobile services in Germany via Telefonica Deutschland and widespread investments in Latin America.
BT has an extensive international presence through BT Global Services, its enterprise arm, which might appeal to Telefonica.
The UK operator of course has heard grand talk of global alliances before. Back in the 90s, it formed Concert with US operator MCI, and later other carriers, to target global corporations.
But the relationship with MCI came to grief, and the US operator was replaced by its rival, AT&T. The BT, AT&T relationship also subsequently failed and Concert was broken up, a chastening experience for the UK operator.