Friday, 29 May 2020

Virgin Media and O2 strike £31bn merger, shaking BT

by Harry Baldock, Total Telecom
Thursday 07 May 20

The merger will radically reshape the UK telecoms market, creating a real challenger for BT’s hegemony

Today, Liberty Global (Virgin Media) and Telefonica (O2) have announced the merger of their UK businesses in a deal worth £32 billion.   The deal was first reported on at the weekend, but discussions have apparently been ongoing for the past five months.   The 50…

Today, Liberty Global (Virgin Media) and Telefonica (O2) have announced the merger of their UK businesses in a deal worth £32 billion.
 
The deal was first reported on at the weekend, but discussions have apparently been ongoing for the past five months.
 
The 50:50 joint venture will see the companies combine their assets, providing each with a crucial asset that they previously lacked: O2 will gain access to a fixed line arm, while Virgin Media will finally have a mobile network to call its own.
 
“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,” said José Álvarez-Pallete, chairman and chief executive of Telefonica.  
 
The synergies provided by the merger are expected to bring cost savings of around £6.2 billion.
 
The newly merged entity will combine the UK’s biggest mobile network with its second largest broadband network, creating a competitor large enough to challenge BT’s dominance in the UK market. However, it appears that the real loser here is not necessarily BT, but Vodafone, with the new deal likely jeopardising the virtual network partnership they made with Virgin Media last year.
 
With two significantly larger competitors to contend with, consolidation between some combination of Three, Vodafone, and Sky and TalkTalk could become a much more realistic proposal in future.
 
The deal is, of course, subject to regulatory approval, though this is “unlikely to be an issue as the deal does not create a significantly stronger player in either the fixed-line or mobile markets,” explained Kester Mann, director, consumer and connectivity at CCS Insight.
 
 
How does this blockbuster deal change the face of the UK’s mobile and fixed markets? Find out from industry-leading speakers at this year’s Connected Britain 
 
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