Ovum: Telefónica buys UK's O2 for £18 billion

Ovum's Marta Muñoz Méndez-Villamil takes a look at Telefónica's £17.7 billion acquisition of O2's operations in Germany, Ireland and the UK.

Méndez-Villamil thinks "O2's relatively small size in Europe, in comparison with larger players such as Vodafone, Orange or T-Mobile, makes it the perfect target for an acquisition." Her assessment of the deal is it offers Telefonica "the possibility to enter two of the largest European markets, with a combined mobile customer base of over 141 million, and mobile revenues estimated to be above $26 billion in each market. Compared to the 38 million customers and $18 billion in revenues that the Spanish mobile market has at the moment, the UK and Germany can place Telefónica as one of the largest operators in Europe."

She also believes it's a good deal for Telefónica becuase "the UK and Germany are two of the most advanced markets in Europe. O2 has managed to defend its position well whilst operating in highly competitive environments. This is something Telefónica could learn from, especially now that it faces increasing competition from Vodafone and Orange in its home market."

As for O2, Méndez-Villamil opines that it "offers the possibility to benefit from the economies of scale of belonging to a larger operator, and it acts as an entry point to one of the regions with the largest growth potential in future years: Latin America. Surviving as a small player in a pond with such large fish would have been a difficult task for O2."