3 Deal To Buy O2 Back On -- Could The Ultimate Winner Be Sky?

Well, I'll be blown -- what a difference a day makes. Yesterday it appeared that O2 has turned its back on 3 and was talking to Sky about a possible partnership. Today, the news is about as strong as it can get -- 3 has confirmed it is in talks that have progressed well to buy O2 for £10bn, up a billion on its last offer.

This just shows that sometimes the way to get noticed and have a suitor give you a little more attention is to be seen out laughing and enjoying yourself with another potential beau. 

If 3 meets no competition obstacles and O2 agrees to the sale, in the stroke of a pen the merged networks would be the largest in Britain. The irony, of course, is that 3 was often seen as the noisy small player in the British market that wanted to be bought. It innovated and marketed itself in a very different way (singing kittens, moonwalking pony) in what most industry insiders saw as a loud attempt to attract attention and be snapped up by one of the now three larger players. As soon as Orange and T-Mobile formed EE, the feeling was that the network has to hurry along and get snapped up or risk being an old maid.

There was partially some truth in this, but Asia's richest man -- Li Ka-shing, who owns 3's owner -- has obviously realised that if it isn't going to be bought, it might as well do some buying and move away from being the minnow in the UK market to the leader. With Britain booming and China showing signs of flatlining growth, the move would appear to make all the more sense.

So where does this all leave Sky? Was it really just a footnote in O2 being wooed by 3? Yesterday the satellite company appeared to be in a strong position -- and the truth is, it still is. It bought O2's fixed-line business a couple of years ago and so now has a strong telephone and broadband operation running alongside the satellite tv service it is better known for. That must make it a worthwhile target for a combined 3 and O2 to at least partner with, doesn't it?

The proposed merger between 3 and O2 is all about size, but it doesn't really tackle the issue that an enlarged mobile network doesn't make the combined business any closer to delivering a quad play solution which Sky could bring to the table.

So I suspect that the talks with Sky will continue. They're a useful backup in case competition issues throw a proverbial spanner in the works, and even if they don't, they open up the prospect of 3 and O2 negotiating a partnership which takes their mobile dominance and adds broadband, fixed line and entertainment to the mix.

If Vodafone and EE have not seen this, I would be very surprised. If they are not doing something about this, I'd be even more surprised.

Yesterday I mused what a good time it was to be a mobile network. Turns out it's probably even better to be Sky right now.

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