Leader: O2 be in Spain

O2 has been on the auction block for longer than we care to remember. Rumours that Telefonica was going to sweep it into its portfolio have been around for well over a year - only today details of a deal, including a price, have been revealed.

The price is high - at £17.7bn about the highest in the sector since the telecoms bubble - but the two interesting stories here are the musical chairs that led to the deal finally being done and what a combined entity might mean.

Now - barring a successful counter bid - Telefonica will reach the premier league of European operators that includes Orange, T-Mobile and Vodafone.

On the first point, we can't say much. While Spain's Telefonica has been the suitor of choice for some time, others - most notably a German-Dutch bid from a teaming of Deutsche Telekom and KPN - have been sniffing around. There was even talk about a bidder from east Asia.

The Telefonica deal seems to make the most sense. There are no competition issues, something that would be less clear if Deutsche Telekom had been successful - that telco owns T-Mobile but the UK is now diverse enough that regulators could have possibly consented to O2 and T-Mobile combining here.

Also, whereas Telefonica isn't present in Germany, Ireland or the UK - O2's territory - it has interests across Latin America. O2's expertise, looking to various technologies and approaches, would seem to bring a lot to that far-reaching empire.

Now - barring a successful counter bid - Telefonica will reach the premier league of European operators that includes Orange, T-Mobile and Vodafone.

As for what the entity will mean for O2 customers... we don't predict any radical changes. In theory, greater scale should lead to more efficient procurement, which should enable better value services - but don't go holding your breath for noticeable differences.

Cellular services - over GPRS, 3G, HSDPA and who knows where beyond - as well as public Wi-Fi should carry on as they were. That Telefonica also does i-mode is a pleasant coincidence, we suggest, rather than any prelude to the merger.

O2, which was spun out of British Telecom, may in the end be most talked about as the company that left Vodafone as the last remaining facilities-based mobile operator headquartered in the UK. And even if a counter bid were to be successful over the next few months, that statement would still stand.