O2 mulls renewed challenge to BT's leadership in UK broadband

Telefónica owned O2 is considering making another push into the UK’s fixed-line broadband market in a challenge of local incumbent BT, said Bloomberg on Thursday.

No plan had yet been tabled to the Spanish company’s executive committee and talks were at an early stage, people familiar with the matter told Bloomberg.

In fact, the unnamed sources said Telefonica might yet decide not to go ahead with the project.

BT shares fell as much as 2.1% on the back of the news, but by 1559 BST were trading just 0.49% lower at 224.15p.

If Telefónica did decide to enter Britain’s landline market it has various options at its disposal, including leasing bandwidth wholesale from BT or Liberty Global Plc’s Virgin Media, building out its own network or acquiring an established player. Merger and acquisition opportunities were limited, so the company needed to look at an array of alternatives, one of the persons said.

The only national fixed-line network in Britain beside BT’s was Liberty’s Virgin.

Telefonica Chairman Jose Maria Alvarez-Pallete was on record stating that the market switch toward converged mobile and fixed-line offerings was driven by supply.

The news came as BT moves ahead with the sale of its profitable Irish division following an accounting scandal at its Italian business branch.

Separately, on Thursday the Financial Times reported that BT has struggled to find a buyer for its Italian unit, according to people with direct knowledge of the situation.