Pay as you Gone: Tesco looks to sell its Mobile operations in plans to reduce debt

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Tesco Mobile has 4 million subscribers and is thought to return profits of around £100m per year.  However, in an attempt to scale down its business empire, Tesco is preparing to sell off its mobile provider.

Tesco Mobile is a joint venture with O2 which sees the supermarket effectively buy airtime from O2 at wholesale prices and then sell this on to end-users at discounted rates.  The absence of capital expenditure on infrastructure is thought to make the entity an attractive deal, with some analysts estimating a fee in the region of £800m, based on current profit levels.

Tesco’s broadband business and pay-per-view movie service have recently been purchased by mobile operator EE, a possible buyer in the latest round of sales by the supermarket giant.

The news follows a recent announcement that O2 itself is to be purchased from Telefónica by Hutchison Whampoa Limited, owner of rival mobile operator Three.  An initial fee of £9.25bn will be paid and may be topped up by a further £1bn, if cash flow targets are satisfied.  The deal is expected to result in a merger of o2 and Three, leaving only three network providers, and so is attracting the scrutiny of competition authorities.

The transaction is not expected to affect a previous agreement between o2 and Sky to allow the latter operate a virtual network using o2’s broadcast masts and infrastructure.  In fact, this is the latest move in the television and internet providers into the mobile market, following BT’s decision to team up with EE.

This is a great example of how some businesses need to review strategy and establish where it may need to conduct some form of restructure. In this case the substantive reason being to scale down the size of the empire to concentrate on other areas.

If your business requires advice with regard to a sale, purchase, or restructure, please contact Pauline Rigby, Head of the Corporate & Restructuring Team at Forbes Solicitors by telephone on 0800 689 3206 or via our Contact Form

Pauline Rigby

About Pauline Rigby

Pauline Rigby is Head of the Corporate and Restructuring team at Forbes Solicitors. Pauline’s blogs cover a wide range of corporate issues, specifically areas including company formation, banking, joint ventures and shareholder matters, contractual matters and equity fundraising or investing.
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