O2 places shares and basks in new name

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By Steve Slater

LONDON (Reuters) - Mobile phone operator O2 has changed its name from mmO2 and sold almost 300 million shares to buy out many of its smaller shareholders as part of a restructuring.

O2 announced in January it was offering to buy out its small investors as part of a deal to reduce a fragmented shareholder base and allow it to pay a maiden dividend in August as part of the restructuring.

On Monday it said JP Morgan, Cazenove and Merrill Lynch would place 299.5 million shares to fund a cash alternative to smaller shareholders. The shares, worth about 380 million pounds, represent around 3.4 percent of O2’s issued share capital.

The shares were placed at 125 pence each.

By 10.55 a.m. O2 shares were down 0.4 percent at 127-1/4p.

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Dealers said the placing came at a good time for O2, as its shares have been gaining traction for several months as optimism has built that it has turned around its German business.

"It’s an exciting story within the telecoms sector and since its demerger in 2001 it’s had strong operational performance and there’s been a sequence of upgrades. Germany is now the key to further upside," said Christian Maher, analyst at Investec Securities.

Analysts at JP Morgan also upgraded their rating on O2 to "overweight" from "neutral", with a price target of 140p.

O2, Europe’s sixth biggest mobile operator, said in January its customer base had grown to 23.2 million, including 7.4 million in Germany.

O2 is hoping the restructuring will resolve 3 key issues it inherited after demerging from BT Group in 2001: a large and costly number of small shareholders; U.S.-listed ADR shares, despite no U.S. business; and a corporate structure that does not allow it to create distributable reserves.

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