The global telecoms “land grab”

Telefonica's £17.7bn bid for UK mobile group O2 is the latest in a flurry of recent merger and acquisition activity in the European telecoms sector.

Telefonica, Spain's biggest telecoms group, this week broke free from a pack of potential bidders for O2 with a £17.7bn offer for the UK's second-largest mobile operator, says the Financial Times. The deal will make Telefonica the world's second-largest listed international telecoms group, behind the UK's Vodafone. It will also gain 24.6 million clients in the UK and Germany to Telefonica's 90 million-strong, mainly Spanish and Latin American, subscriber base. This bid should not only spice up competition for market share in Spain, but is likely to spark further acquisitions in the sector across Europe.

For O2 shareholders, it's a "fantastic" result, says The Daily Telegraph: they get a premium of 22% above Friday's closing price of 164.25p. Indeed, at 200p a share the deal is probably "a good 50p" beyond what the Spanish group could justify paying in the normal course of events. But these are not normal times: mobile operators are partaking in a "rapid land grab". Revenues per subscriber are falling and the big players are worried. And even though Deutsche Telekom and T Mobile have said they won't bid, the deal isn't done yet.

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