O2 and Virgin Media agree on £31bn merger

7 May 2020

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The owners of O2 and Virgin Media have confirmed that they will combine the UK businesses in a £31bn merger deal.

Telefónica and Liberty Global have confirmed that they plan to merge O2 and Virgin Media in a £31bn deal, creating what will be the UK’s largest fixed-mobile provider.

Telefónica, the Spanish telecoms company that owns O2, said on Monday (4 May) that it was in negotiations with Liberty Global, the parent company of Virgin Media UK.

Now, the companies have confirmed plans to merge in a 50-50 venture, combining TV, broadband and mobile services. The combined business will have 46m broadband, mobile and video subscribers, with revenue of around £11bn.

The transaction is expected to close in mid-2021, subject to regulatory approvals.

Combined business

Telefónica CEO José María Álvarez-Pallete said: “Combining O2’s number-one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game changer in the UK, at a time when demand for connectivity has never been greater or more critical.

“We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value. This is a proud and exciting moment for our organisations, as we create a leading integrated communications provider in the UK.”

Mike Fries, CEO of Liberty Global, added: “We couldn’t be more excited about this combination. Virgin Media has redefined broadband and entertainment in the UK, with lightning-fast speeds and the most innovative video platform.”

Fries said that “the future of convergence is here today” with the merging of Virgin Media and O2, and suggested that there will be benefits to be seen from fixed-mobile convergence (FMC). “We’ve seen the benefit of FMC first-hand in Belgium and the Netherlands. When the power of 5G meets 1Gb broadband, UK consumers and businesses will never look back.”

The joint venture also aims to become a challenger in the B2B space, offering new services that combine the companies’ digital skills, networks and product portfolios, such as cloud, big data, IoT and cybersecurity services.

‘We have been investing heavily in the UK’

Fries also said that the two companies are committed to the UK government’s digital and connectivity goals, with plans to invest £10bn in broadband and 5G networks over the next five years.

Leadership of the joint venture will be agreed after the closing of the deal. Telefónica and Liberty Global have agreed that the board will consist of eight members, four from each company.

Speaking to the Guardian, Álvarez-Pallete said: “The UK is one of the most attractive markets on Earth. Even considering Brexit, we have been investing heavily in the UK. It is the right time to commit to the future of the UK by building this value proposition.

“We are both coming to the joint venture with the expectation we will remain partners. We don’t come into this with the expectation that we will turn right or left at a certain point in time. If a listing were to come down the road it can provide transparency of value and give people the change to own part of a national champion.”

Kelly Earley was a journalist with Silicon Republic