Brexit Uncertainty Threatens to Chill Investment, O2 Chief Warns

(Bloomberg) -- The U.K.’s second-biggest wireless carrier said that uncertainty over Brexit’s timing and terms threatens to suppress business investment, as separation talks between Britain and the European Union continue to stall.

“It’s not great to investors to say we’re not quite sure how this is going to play out,” said Mark Evans, head of Telefonica SA’s O2 unit. “We operate in a market which requires multi-hundred million, billion investment and you need long-term certainty.”

British premier Theresa May this week dashed expectations of a swift Brexit transition deal, and businesses are still awaiting clarity on what kind of trade arrangement the U.K. wants with the EU. While Brexit hasn’t hurt O2’s sales, the carrier won’t be complacent about the prospect of a weakening economy forcing consumers to cut back on mobile spending, Evans said.

“The sooner we get clarity on what will play out, the better,” he said.

On mobile roaming, O2 said it expects its customers to continue to benefit from the EU’s abolition of charges in June, but it couldn’t guarantee that arrangement will continue post-Brexit.

“We’re not completely in control of that relationship,” Evans said, pointing out that continental phone networks could decide to increase how much they charge for access, which may make the offer commercially untenable. “We simply don’t know the rule-set in years to come.”

Stock-market volatility after the Brexit vote last year forced Telefonica to shelve plans for an initial public offering or sale of O2, as the Spanish telecommunications company looks for ways to reduce debt. An IPO could now come as soon as the end of the year, Bloomberg reported in April.

Telefonica is continuing to invest “disproportionately” in O2 and will probably want to keep an interest in the business in the event of an IPO, Evans said.

“Despite Brexit, they’re still investing,” he said. “I don’t think that will change, listing or not.”

To contact the reporter on this story: Joe Mayes in London at jmayes9@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Ville Heiskanen, Kim Robert McLaughlin

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