Virgin Media and O2 reportedly in merger talks

News

Virgin Media’s owner Liberty Global and O2’s parent company Telefónica are in talks about potentially combining their UK assets in a joint venture.

If the companies reach an agreement, details could be released this week, Bloomberg reports. The move would allow the companies to take on rivals such as BT and Sky, both of which offer converged services.

It would be the biggest deal in the UK telecoms industry since 2016, when BT agreed to buy mobile operator EE for £12.5 billion.

Since selling its cable assets to Vodafone in Germany, the Czech Republic, Hungary and Romania last year, Liberty Global has said it was looking for opportunities to expand its activities in the UK.

Uncertainties

In 2016, a £10.3 billion takeover of O2 by CK Hutchison Holdings, owner of Three UK, was blocked by the European Commission over competition concerns.

Virgin Media has also been linked with several possible mergers or asset swaps in the UK recent years but none came to fruition.

Also in 2016, Liberty Global combined its Dutch operations with Vodafone’s in a joint venture deal. Sources told Reuters this could form a ‘blueprint’ for the possible UK merger.

Mobile operator O2 has 34 million customers while Virgin Media has around 3.1 million mobile customers and 5.9 million cable customers.

Liberty Global also owns a 9.9% stake in UK TV channel ITV, leading to speculation about whether this might also be included in any deal.

Telefónica identified the UK as one of its key markets (along with Spain, Brazil and Germany) in its five-point strategic plan announced late in November, although a number of commentators were sceptical about its enthusiam for the UK market.