mm02: No to merger with Dutch telco

Following the conclusion last week of the hard-fought battle to buy US third-place mobile operator AT&T Wireless, it looks like a telecoms tussle could be on its way on this side of the Atlantic - with mm02 the latest in the acquisition crosshairs.

A sharp rise in the share price of the formerly BT-owned operator has fuelled talk that mm02 is ripe for a buyout. It was confirmed on Friday that the Dutch telecoms group KPN had made an approach to merge with mm02, but that talks had "now ceased", according to a statement from the mobile company.

The offer is thought in the region of £10bn and was an attempt by KPN to gain a firmer footing in a mobile market that is largely controlled by big names such as Vodafone. The companies hold third and fourth place in the German market and a merger would be one way to fight off stiff competition.

The Dutch operator is not expected to launch a hostile takeover attempt and will now be looking at new ways to give money back to its shareholders after a profitable 2003.

It's not the first time mm02 has been linked to a buyout. Previously tipped contenders include 3's parent, Hutchison Whampoa, and Japanese giant DoCoMo.

However, according to Julian Hewett, chief analyst at Ovum, this time there are more operators eying up mm02, including Hutchison, Telefonica, Telecom Italia Mobile and BT.

BT "has followed the route of being a virtual operator called BT Mobile on T-Mobile's network. But it also has existing links with mmO2 for serving its business accounts. So far, BT Mobile's growth has been sluggish. Acquiring mmO2 would get BT back into the mobile telecoms market. KPN remains the favourite. But I think BT might make a move too - two incumbents slugging it out," he said in a statement.