The M&A talk over in Europe today is focused on the UK, where BT and Telefonica are dancing around a possible transaction. While described by BT as 'highly preliminary', the idea would be for BT to get back into the wireless game by reacquiring O2, which it spun off over a decade ago. Telefonica would likely then own a significant minority chunk of BT. There is also talk that O2's competitor EE has also been dicussing similar things with BT and others.
The UK's telecommunications sector has long been a tough neighborhood, and it's probably a buyers' market at this point. There is a complicated bit of chess going on between the telecommunications and cable giants of western Europe these days. Consolidation will happen, but just which brands will expand their reach and which will retrench is unclear. Telefonica, however, has been publicly looking to reduce debt. They've said O2 is a core asset, but everyone has a price and if they got a good one for O2 they'd likely take it.
Meanwhile, not having a wireless play has left BT out of much of the game as compared to its European brethren, such as Orange, Teliasonera, Deutsche Telekom, and yes Telefonica. Instead, they've had to focus on the wireline business, the segment the big carriers have so often preferred to leave in the shadows these days. Bringing the O2 business back into the fold after some 12-13 years would surely appeal to them, although I suspect it might face more than a little regulatory scrutiny.
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