Struggling British Multinational Tesco Seeks to Unload its Mobile Business

Tesco Mobile

The multinational grocery and merchandise retailer Tesco has certainly had a rough start to 2015. Early this year Britain’s largest supermarket chain was entangled in a corporate scandal when it was discovered they had over-stated their half year profits by $406 million. Eight executives have since been suspended and the firm is being investigated by Britain’s Serious Fraud Office, which is the last thing they needed. In order to keep expanding their sprawling empire Tesco leveraged themselves to the rafters; they currently owe $34 billion to creditors and have lost $9.8 billion so far this year, which has prompted a scramble to cut costs and sell off assets. The company is closing 43 of its 85 stores in Britain, is expected to lay off 10,000 employees, and savagely cut pay and pensions. On the asset side they have sold their fleet of corporate jets, a music streaming service, their broadband business, and pay-per-view movie service Blinkbox. The next asset on the chopping block is Tesco Mobile, the carrier service it offers utilizing O2’s network.

It is a shame Tesco has to sell off its mobile division due to pressure from creditors as it is one of the company’s only businesses that remain profitable. Tesco Mobile has the largest subscriber base of any MVNO in the UK, which comes in at 4 million strong, and sells approximately 2 million phones per year via its retail stores. The service generates roughly $154 million in profits each year, which the struggling company could certainly use to pay off its mountain of debt. According to the Financial Times the sale of Tesco Mobile could net the firm hundreds of millions of pounds, which would give it some breathing room from creditors. However, if the firm sells off all of its profitable businesses how exactly do they plan to pay back the rest of their $34 billion in debt? The decision seems short-sighted, though we have no idea exactly how much pressure Tesco is under from shareholders, creditors, and the pensioners they owe.

It is unclear who might buy Tesco Mobile. O2 is an obvious choice, as Tesco Mobile is a joint venture with O2 and its subscribers are already on their network. However, O2’s Spanish owner Telefonica has already agreed to sell the company to a Hong Kong based conglomerate. Another potential buyer is telecommunications company TalkTalk, who purchased Tesco’s broadband business and Blinkbox, and has a thriving MVNO business on O2’s network. A longshot is Sky, also a telecommunications company, who is slated to start providing mobile services in partnership with O2 next year.

Tesco’s recent struggles are disheartening, especially for fans of Tesco’s Hudl line of Android tablets; yes, the Wal-Mart of Britain also produces tablets. The 8.3 inch Hudl 2 has received rave reviews from technology outfits spanning both NA and the UK. It is often compared to the Nexus 7 in terms of quality and specs, except it has a micro HDMI port, dual stereo speakers, a larger display, and is considerably cheaper at $150; a pretty remarkable device for the price. If only Tesco could figure out its primary business: selling groceries. Those looking for something cheap and cheerful should pick up a Hudl sooner than later. Considering the financial troubles looming ominously over Tesco the Hudl line of tablets will most likely be discontinued, if the company doesn’t go completely bust.