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Tesco readies sale of Tesco Mobile

Tesco Extra store

Tesco is poised to put its mobile business on the block, as chief executive Dave Lewis intensifies his sale of the supermarket chain's non-core assets.

The business could be worth hundreds of millions of pounds, given that Tesco's share of its profits is about £100m a year, according to people with knowledge of Tesco's operations, report Andrea Felsted, Arash Massoudi and Daniel Thomas.

Tesco has been talking to bankers over recent days about putting Tesco Mobile up for sale, according to people familiar with the situation.

Tesco Mobile is the largest branded mobile service in the UK, with more than 4 per cent of subscribers at the end of last year according to Ovum, the research group.

The retailer uses the mobile network owned by O2, which is a 50 per cent partner in the business, under wholesale rates as a so-called "mobile virtual network operator".

The British mobile industry is fiercely competitive, with more than 100 rival branded services including from other retailers such as Carphone Warehouse that use the networks owned by the four mobile network operators.

The value of Tesco Mobile will be in part be the brand itself, although the retailer operates more than 250 Tesco Phone shops. Tesco also sells as many as two million mobile phones a year. Tesco operates a value-based mobile service, which has a number of direct rivals such as TalkTalk and GiffGaff.

Tesco has already sold its video TV service Blinkbox to TalkTalk, which would be a potential acquirer for the Tesco Mobile customers.

O2 is regarded by some analysts as another an obvious buyer of the business. However, O2 is being sold by Spain's Telefonica to Hutchison Whampoa to merge with its British business, Three, which is expected by analysts to be cleared by Brussels regulators but only after agreeing to open the network further to similar branded competitors. Similar remedied have been levied in comparable deals in Germany and Ireland.

All parties declined to comment.

Source : Andrea Felsted - Financial Times

10 May 2015

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