Virgin Media and O2 have agreed to join forces in a UK merger that will form a £31 billion company, their parent firms have announced.
US media firm Liberty Global, the owner of the Virgin Media cable TV and broadband provider, as well as Spain’s Telefonica, which owns O2, said both telecoms firms have agreed on terms which would unlock a £10bn investment in the UK market over five years once completed.
According to Sky News, Telefonica and Liberty will have an equal share in the new joint venture with both firms informing investors that the tie-up would also realise savings of more than £6 billion a year by the fifth year.
O2 is the UK’s largest phone company with about 34 million users while Virgin has about six million broadband and cable TV customers in addition to three million mobile users.
“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 Telefonica chief executive Jose Maria Alvarez-Pallete.
“Virgin Media has redefined broadband and entertainment in the UK with lightning-fast speeds and the most innovative video platform. And O2 is widely recognised as the most reliable and admired mobile operator in the UK,” added Mike Fries, chief executive of Liberty Global.
True competitor to BT
While there’s more information to confirm, there’s no doubt that this merger will formulate a new telecoms giant to rival BT — one of the largest players in the market.
“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,” said Sophie Lord, executive director of strategy at Landor.
“This is big news, and much needed for a slightly tired category. Two household names, both British in brand origin, now with the scale to become a true competitor to BT,” she added.
With 5G technology being introduced, Lord said the new merger could deliver a new narrative to the concept and become a vital leader in the telecoms market.
“There is a lot to uncover still, certainly in terms of the deal details. Will this be a multi-platform play, about scale and breadth? Or will the opportunity be pursued to actually create an ownable experience that is missing from the platforms at the moment? Will it be a technology company, an innovation company, or simply entertainment?” she continued.
“Certainly 5G needs a new narrative, and perhaps this is the brand to own not just the technology, but the experience that it can bring. These two great brands have a synergistic quality to them – Virgin Media famous for ‘fast’ and irreverence (if rather lacking any real personality), O2 famous for entertainment and service.
“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 benefitting, rather than the just the deal makers and brokers,” Lord concluded.