Prey Turned Predator: mmO2 Ponders E-Plus Bid

May 21, 2004 - source: BWCS

Announcing his company's encouraging annual results on Tuesday, mmO2 chief Peter Erskine hinted that he might be considering a bid for KPN's German subsidiary E-Plus, according to a report in the Financial Times. This is an interesting turn of events, given that KPN launched its own bid for mmO2 earlier this year and rumours of a takeover of its loss-making German venture are refusing to go away. However, Erskine said that strong growth at O2 in Germany made a bid for E-Plus more of an option.

O2, which is currently the weakest player in the German mobile market with around 6 million subscribers, confidently said it would overtake third-placed E-Plus in terms of revenues within the next 12 months. In the year to 31 March, the operator reported a 32 percent increase in revenues to €2.17 billion, with a pretax loss of €102 million. Subscriber numbers rose 24 percent over the year, increasing O2's market share from 8 to 9 percent.

O2 managing director Rudolf Groeger confirmed that KPN had made an unsuccessful bid for the company in February and emphasised that O2 was not for sale. He admitted, however, that the operator was still too small for the UMTS era. "We have not yet achieved sufficient critical mass," he said, adding that in order to compete successfully they company estimated it would need around 10 million customers in Germany.

In the UK, O2 acquired over 1.2 million new customers in the year to end of March, with a 10 percent increase in ARPU. Its total UK subscriber base now stands at 13.3 million. O2's joint venture company Tesco Mobile, which was launched in September 2003, signed up an additional 250,000 customers.