Mobile phone giant O2 plans to follow Vodafone into the fixed-line broadband market through the buyout of an established provider or a strategic alliance. Arthur Beesley, Senior Business Correspondent
The company had inconclusive buyout talks last year with fixed-line provider Perlico, which was acquired last month by Vodafone in a deal valued at up to €80 million.
Controlled by Spanish multinational Telefónica, O2 is likely to renew its efforts to enter the fixed-line broadband market next year. Such a development is seen as a natural extension of its mobile broadband offering and a response to Vodafone's move.
O2 has extended its reach in recent months by providing wholesale mobile services to supermarket group Tesco, which sells the product to its own customers. With the Irish mobile phone market at saturation point, O2 sees the growing broadband sector as an opportunity for lucrative expansion.
The bulk of this market is in the fixed-line area. Figures to June from telecoms regulator ComReg indicate that mobile broadband accounts for only 45,000 of 700,000 subscribers.
At present O2's most likely partners or buyout targets include Magnet, owned by Columbia Ventures Corporation, and Smart Telecom, controlled by businessman Brendan Murtagh of Kingspan. The attitude of these companies to possible overtures from O2 is unknown.
Smart retained some 15,000 residential clients after Eircom moved last year to cut off 40,000 telephone customers in a dispute over payments. Mr Murtagh later refinanced the company.
Magnet Business introduced its broadband service last July in the "main business districts" of Dublin, Limerick, Cork, Galway, Waterford and Portlaoise. The company piggybacks on Eircom's network using the local loop unbundling process.
A report yesterday in Spanish business newspaper El Economista suggested that Telefónica wants to acquire fixed-line and broadband assets in Ireland with a view to creating an integrated telecoms operation at O2 Ireland along the lines of Telefónica's own business in Spain.
However, O2's plans here are said to be on a more modest scale. It is understood that they do not embrace the possibility of buying some of Eircom's retail assets. Eircom's Australian owners are examining the possibility of splitting the group into three or four separate business units if it succeeds separating its network operation from its customer service divisions.
El Economista quoted remarks by O2 managing director Peter Erskine.
Separate reports in London this week, which quoted Mr Erskine and his colleague Matthew Key, said O2 planned to form an alliance here to offer fixed-line broadband services.
Unknown at the moment is the amount of money O2 would pay to buy into the broadband market. It is the second-biggest mobile operator here, with a market share of 33.8 per cent, behind Vodafone's 45.3 per cent.
