£31bn deal to merge O2 and Virgin Media

Tie-up ‘will transform telecoms in UK’

TELECOMMUNICATIONS GIANTS Virgin Media and O2 are to merge, creating a £31bn media conglomerate, their parent firms have confirmed.

Liberty Global and Telefonica, owners of Virgin Media and O2 respectively, said on Monday they were in talks over a possible combination.

Their amalgamation will create a major rival for BT, which owns EE, the UK’s second largest mobile network. O2 was originally the BT subsidiary Cellnet and was bought by Madrid-based Telefonica in 2006.

The tie-up will bring together O2’s 34m mobile customers with Virgin’s 5.3m broadband, pay-TV and mobile subscribers.

Industry analyst Kester Mann, from CCS Insight, said the deal would “transform the UK telecoms landscape”.

He said: “A combination of O2 and Virgin Media is a natural fit. Each side gains crucial assets it severely lacks: a mobile network for Virgin and a fixed-line [broadband] arm for O2.”

The deal, which is expected to close in the middle of next year, is subject to regulatory approval.

In a statement, the two firms said they would create a “full converged platform” for customers and invest £10bn in the UK over the next five years.

But in a veiled hint of possible job cuts, they also said the 5050 joint venture would deliver

£6.2bn worth of “cost-saving synergies”.

Liberty Global, a multi-national outfit headed by American billionaire John Malone, has owned Virgin Media since 2013. The company had been created seven

Industry analyst Kester Mann, speaking yesterday. years earlier by the merger of the UK’s two main cable companies, Telewest and NTL, who licensed the use of the Virgin name from Sir Richard Branson.

Telewest was itself the result of consolidation within the cable industry during the 1990s and 2000, which saw smaller, regional firms like Yorkshire Cable swallowed up.

O2, whose mobile network is also behind services offered by GiffGaff, Tesco Mobile and Sky Mobile, is the UK’s largest phone company.

Sophie Lord, of the industry consultant Landor, said users stood to benefit from the tie-up.

“Virgin Media have made no secret that it wanted to take on BT, bringing the Virgin challenger mindset back and it seems this is the deal to do it,” she said.

“Let’s hope they become more than the sum of their parts and not just a holding company to its many platforms.

“If they manage this then we’ll all be benefiting, rather than just the deal makers and brokers.”

The announcement comes a week after a Virgin Media outage caused chaos for users who currently rely on its network to work from home.

Mike Fries, chief executive of Liberty Global, said Virgin had “redefined broadband and entertainment in the UK”.

Jose Maria Alvarez-Pallete, chief executive of Telefonica, said: “We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure.”

Combining them is a natural fit... each gains crucial assets.