Daily Mirror (Northern Ireland)
Mergin’ media in £31bn megadeal to take on BT
O2 and Virgin Media join forces to form new giant
MOBILE giant O2 and cable TV firm Virgin Media have agreed a £31billion mega-merger.
Bosses claim the new industry titan will be a “game changer” for customers, offering “more choice and value”, though some experts disagree.
It will also prove a major challenger to telecoms heavyweight BT and satellite giant Sky.
BT has spent a fortune on sports TV rights and bought mobile network EE for £12.5billion in 2016.
The proposed 50/50 joint venture deal was announced yesterday by Telefonica, O2’s Spanish owner, and Liberty Global, Virgin Media’s US parent company.
Richard Branson no longer owns it but the Spanish firm pay to use the Virgin name. If the deal goes ahead, the new giant would have customers subscribing to more than 46 million video, broadband and mobile products, and £11billion in annual sales.
Dan Howdle, consumer telecoms analyst at Cable.co.uk, said: “Although the news has been brewing for some time now, today’s announcement is still likely to put the wind up competitors in both the broadband and the mobile space, particularly BT.
“Greater competition is almost always good for consumers.”
PROFITS
But Professor John Colley, Associate Dean at Warwick Business School, warned: “Where there are three competitors, profits and prices tend to be much higher than where there are four or five competitors. It seems unlikely that customers can gain from this.”
Jose Maria Alvarez-pallete, Telefonica Chief Executive Officer, said: “Combining O2’s No1 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.”
Mike Fries, CEO of Liberty Global, said: “We couldn’t be more excited about this.” The proposed deal still needs regulatory approval and is not expected to complete until the middle of next year.
The two firms are earmarking £540million a year of cost savings.
Most will come from combining technologies but there are likely to be some job cuts. The new firm will also have £18billion of debt.