The truth behind Virgin Media And O2 Merger

May 13, 2020 - Reading time: 4 minutes

Virgin Media has announced plans to create a single company offering a converged service combining fixed and mobile connectivity. Earlier this week, it was rumoured that parent company Telefonica and Liberty Global had agreed to combine Virgin Media’s ultra-fast cable network with O2, the UK’s second-largest mobile operator and the country’s second-largest broadband provider.

According to a recent report by market research firm IHS Markit, o2 has 34.5 million users in the UK, while Virgin Media has more than 5 million subscribers.

The combined customer base immediately propels the merged company into the realm of Europe’s largest telecommunications company. Two of Britain’s biggest telecoms giants have confirmed their merger plans, creating a bigger rival for British Telecoms.

Virgin Media and O2 will merge, reportedly affecting 40 million UK homes. Telefonica and Liberty Global have confirmed merger plans, with BT, EE and Vodafone likely to take over. On Monday, it was confirmed that there had been talks about a possible takeover.

Now the companies have confirmed that they will merge and plan to combine their combined TV, broadband and mobile services. The deal brings together Virgin Media and O2, two of the UK’s largest media companies, and will create an integrated communications provider with access to more than 40 million UK homes.

The combined business will have more than 40 million customers in the UK and total sales of £11 billion. Virgin Media chief executive Sir Richard Branson said: “The combination of O2” s number one mobile business with Virgin’s world-class TV and broadband – our number one broadband business – is a turning point at a time when demand for connectivity has never been greater or more critical.

Mike Fries, chief executive of Liberty Global, said: “We couldn’t be more excited about this combination. Mike Fies, chief executive of Liberty Global, added: “I couldn’t be more excited about the combination of Virgin Media and O2.

Virgin Media has redefined broadband and entertainment in the UK with the launch of the world’s first high-speed broadband service, Virgin Media Broadband.

O2 is widely recognised as the most admired mobile operator in the UK because it always puts customers first. Several years ago, European antitrust authorities blocked Telefonica’s offer to sell O2 to the owner of mobile rival Three. The combination of the two companies will create the second-largest mobile operator in the world, behind BT, which owns Virgin Media, the third-largest UK mobile operator.

The deal is expected to close by mid-2021, subject to regulatory approval, and will combine O2’s 34 million customers with Virgin Media’s 1.5 million mobile customers in England, Wales and Scotland.

Liberty Global and Telefonica today announced plans to merge their operations into one global leader in building the UK’s digital infrastructure. This will create a fully converged platform for our customers and we will invest £10 billion in the UK over the next five years, “Virgin Media CEO Richard Branson said in a statement.

The merger of Virgin Media and O2 will create one of the largest integrated communications providers in the UK with more than 1.5 million customers and a market share of over 40%.

Virgin Media’s owners and 02 have reached an agreement to merge the two companies into a company worth £31.4billion. Virgin Media is valued at £18.7bn and O2 at around £12.5bn, with a market share of around 40% and a total market capitalisation of £17.2bn (£11.6bn). O 2 will become a joint venture, while Virgin Media will contribute its own shares in the new entity under the merger agreement.

It would create the UK’s biggest phone and internet provider, posing a huge threat to rivals. The companies claim that the move will accelerate competition in the telecoms market if competition authorities allow it.

Virgin Media, owned by US cable giant Liberty Global, and O2, owned by Spain’s Telefonica, are now rivals. The news made headlines last week when the merger of Virgin Media’s parent company, Liberty Media Group, with O 2 was announced.

The merger is expected to generate synergies worth £6.2billion, taking the total value of transactions to £38.5billion, valuing O2 at around £1.4billion – an increase of £2.1billion from its current value.

The deal increases pressure on the highly indebted UK operator, which owns mobile network EE, and would create a major rival for BT. The merger would create “a leading operator in the UK that would be a game-changer – a change for the UK telecoms sector,” said Virgin Media chief executive Sir Richard Branson.

Spain’s Telefonica, which owns O2, confirmed talks with Virgin owner Liberty Global. Both companies stressed that negotiations were ongoing and there was no guarantee of an agreement.

DW Staff

David Lintott is the Editor-in-Chief, leading our team of talented freelance journalists. He specializes in covering culture, sport, and society. Originally from the decaying seaside town of Eastbourne, he attributes his insightful world-weariness to his roots in this unique setting.