Telefonica Said to Seek Bids for Irish Unit 02 Within Month

Telefonica SA, Europe’s most indebted telephone company, is seeking initial bids for its Irish unit within the month, two people with knowledge of the matter said.

The potential bidders -- Hutchison Whampoa Ltd, Ireland’s largest phone company Eircom Group and Liberty Global Inc.’s UPC Ireland -- have received information on the sale, said one of the people, who asked not to be identified as the process is private. Bank of America Corp. is managing the disposal, according to the people.

Telefonica spokesman Miguel Angel Garzon declined to comment on the sale plans.

Telefonica, a year into its most ambitious asset disposal program, may raise more than 700 million euros ($923.6 million) from the sale of its Irish unit, 02, according to the people. Last month, the Madrid-based company repeated that it wants to cut its net debt to less than 47 billion euros by year end from about 51.2 billion euros.

O2 is the second largest of five operators in the Irish cell phone market, which generated 1.5 billion euros of sales last year. The company’s market share fell to 25 percent in the fourth quarter from 34 percent two years earlier, as Vodafone Group Plc, Eircom and Hutchison Whampoa’s Three Ireland added customers, according to ComReg, the Dublin-based communications authority.

Failed Bid

Hutchison, which made a failed attempt to buy Eircom last year, is planning to make a bid for 02, according to people familiar. Three declined to comment on O2.

“We do believe that consolidation will take place in the Irish telecoms market and Three will be a consolidator,” the company said in an e-mailed response to questions. “With Hutchison Whampoa interested in investing further in Ireland, we will consider opportunities that arise.”

Eircom also wants to buy rivals, its Chief Financial Officer Richard Moat said in an interview last month. The company changed ownership last year for the sixth time since 1999, as 1.8 billion euros of its debt was written off under bankruptcy protection.

Paul Bradley, spokesman for Eircom, declined to comment beyond Moat’s statement.

Liberty Global Inc.’s UPC Ireland, a digital television and broadband provider, is also interested in 02, the Sunday Independent reported last month.

“Until we’re ready to launch with a service, we will not be revealing our plans about mobile in Ireland,” UPC spokeswoman Anna-Maria Barry said.

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