O2 Considered Acquisition Of Amena, Wind-CEO"

LONDON -(Dow Jones)- O2 PLC, the U.K. mobile telecommunications company, Thursday said it considered acquiring both Spain's Amena and Italian operator Wind when those assets were for sale.

In an interview with journalists in London, O2 Chief Executive Peter Erskine said that the company considered the acquisitions, but decided against moving as the board didn't believe the purchases would add value for shareholders.

"I doubt that we will do a deal outside our territories in the near term," he added.

He said that O2 was deterred in moving for Amena and Wind due to the valuation of the businesses. He added that O2, which operates in the U.K., Germany and Ireland, doesn't have expertise in the Spanish and Italian markets and he isn't convinced that international scale justifies such an investment.

Erskine said he sees the benefits of in-country scale, but doesn't see any compelling logic or evidence to prove that international scale is advantageous.

However, Erskine said that he would be interested in acquiring KPN NV's (KPN) E-Plus unit in Germany and merging it with O2's German operation.

He said he would be interested in doing a deal "at the right price," but wouldn't specify what that price was.

However, he said that he doesn't think KPN's E-Plus is for sale and that the Dutch company's current management team would be unwilling to sell on the business.

France Telecom SA (FTE) acquired an 80% stake in Amena in July for EUR6.4 billion. Wind, the telecoms arm of energy company Enel SpA (EN), was bought in May by The Weather Group, a consortium led by Egyptian business man Naguib Sawiris, for EUR12.14 billion.

O2 is considered ripe for acquisition, so Erskine's comments that O2 considered acquiring in Spain and Italy will raise eyebrows across Europe. KPN, Deutsche Telekom AG (DT) and Telefonica SA (TEF) have all been linked with an acquisition of the business, but as yet, only KPN has talked to the company about acquiring the business. KPN's approach in early 2004 was knocked back and O2's shares have been on an upward trajectory since.

O2's Erskine, who ruled out a move for Virgin Mobile Holdings PLC (VMOB.LN) in the U.K., said he expects there still to be five mobile network operators in a year's time.

"I'm not hawking this business about," he said.

Erskine also ruled out a demerger of its Airwave emergency services network for the foreseeable future. He said O2 is looking to make a return on its investment and that the company wouldn't consider demerging it until it has better visibility over the size of the business.

Peter Richardson, head of O2 Airwave, said he is confident the company will add a further GBP500 million of orders in the second half after adding GBP500 million of work in first half. Airwave needs to win the contract to supply the U.K. fire services with communications services as well as ambulance service contracts in Scotland and Wales to hit that target.

O2 Chief Technology Officer Dave Williams said the company will look to launch a converged mobile and fixed-line phone in the U.K. market by the end of 2006, although Erskine was more cautious and said "within 18 months."

O2 offers a converged product in Germany while BT Group PLC (BT) has launched a similar service, using different technology, in the U.K.

Williams said there are still technical issues to overcome but the company is trialing handsets from two manufacturers.

The converged phone allows customers to use one handset that charges users one rate while in a "home-zone" and normal mobile rates when outside that zone.

Company Web site: http://www.o2.com

-By Nic Fildes, Dow Jones Newswires; 44-20-7842-9264; nicolas.fildes@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 7th October 2005