Telefonica chairman flies in in bid to sell O2 to BT

The chairman of Telefonica flew into London on Thursday to try to seal a deal over the weekend for BT to buy his company’s British mobile operator, O2, rather than its rival EE.

The mission by Cesar Alierta, first reported by Reuters, was seen by observers as a further sign that BT was more likely to choose O2, which it span off more than a decade ago, as the launch pad for its attack on the mobile market next year.

Sources on the EE side of the discussions said high-level talks between representatives of its owners, Deutsche Telekom and Orange, were still ongoing.

BT’s choice is viewed by analysts as one between a simpler, cheaper deal with Telefonica for O2, valued at around £9bn, and a more complicated and expensive acquisition of EE, worth up to £12bn. The second option would bring more customers and stronger radio spectrum assets, however.

Both sellers are understood to have told BT they are willing to accept shares as part of a deal to reduce the cash bill. Britain’s former state monopoly is expected to select one of them for exclusive talks early next week.

Whichever of the two operators BT does not acquire will be seen as a target for others. Hutchison Whampoa, the owner of Britain’s smallest mobile operator, Three, has been suggested as a potential bidder and private equity firms have previously shown interest in EE.

BT declined to comment.