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O2's Chief Executive Officer Ronan Dunne has played down reports of a takeover from rival broadband provider Three.

Earlier this week, rumours surfaced of a potential bid for O2 from Three's Hong Kong-based parent company Hutchison Whampoa.

However, speaking at a media dinner, O2's Mr Dunne poured cold water on the suggestion, describing this as the "least likely" of all the scenarios in the market.

"At the back end of last year some analysts told me that their main prediction for this year was that Three will buy O2," he stated.

"All I would say is I slept very soundly that night."

Mr Dunne questioned whether consolidation of the mobile industry is the right path to take, saying it is preferable to have four mobile operators in the UK market.

Should two mobile service providers merge, leaving just three in the market, he claimed competition would be tighter.

However, O2's network appears to be up for grabs to the right bidder - potentially a fixed-line operator looking to launch mobile services.

With Telefonica looking to reduce its debt and improve its credit rating, the Spanish firm appears willing to sacrifice its UK mobile business.

Indeed, BT has confirmed holding talks with O2's owners over a potential acquisition of the mobile business it sold back in 2005.

The former national telecoms operator said it had received "expressions of interest" from two mobile network operators, one of which is O2, as it looks to re-enter the mobile market.

EE is thought to be the other mobile broadband provider to have held preliminary talks with BT over a potential buyout.

BT is determined to offer mobile services to its customers, in order to compete with the quad-play broadband deals being offered by a number of its rivals, including Virgin Media and TalkTalk.

As such, a homecoming for O2 - the operator that evolved from BT Cellnet - looks like a more likely outcome than a sale to Three.

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