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O2 confirms it is in merger talks with Virgin Media

by Mark Tyson on 4 May 2020, 12:11

Tags: O2/Telefonica (NYSE:TEF), Virgin (NASDAQ:VMED)

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Just ahead of the weekend The Guardian published a report about the owners of O2 and Virgin Media having talks "to create a new TV and mobile power player to challenge BT and Sky in the UK". Today, O2 UK owner Telefónica confirmed (PDF document link, via the BBC) that talks were ongoing with Liberty Global, the owner of Virgin Media in the UK.

Talks are still in their early stages. Telefónica explained that "the process initiated by both parties is in a negotiation phase, not being able to guarantee, to this date, neither the precise terms nor the probability of its success." The Spanish owned telecoms giant said if any mutual agreements were signed the markets would be informed in a timely manner.

Obviously this would be a major deal in the UK, not just in telecoms, but in entertainment provision, creating a substantial quad-play organisation (TV, broadband, landline & mobile) to compete strongly with BT. The Guardian report does the following sums; "A deal between Virgin Media and O2 would bring together the mobile operator's 34m customers, the largest network in the UK, with the cable operator's 5.3m broadband, pay-TV and mobile users." One must also remember that Virgin Mobile currently piggy backs on BT/EE mobile networks which would be something very likely to change.

Liberty Global owns 10 per cent of ITV (it is the largest shareholder), so this deal could get even bigger, especially as the broadcaster's share price makes it vulnerable right now. Previously, Liberty Global and Vodafone UK have had talks but failed to hammer out a deal. Since Liberty Global and Vodafone have since struck up a JV in Holland, it is possible that any O2 interest in Virgin Media could be contested by Vodafone.



HEXUS Forums :: 15 Comments

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This doesn't fill me with confidence. Erosion of mobile competition. With Virgin mobile going onto Vodafone how does this even work? Then there's the internet side. I haven't heard great things about 02 on that front.
This will set a few pigeons up …

last year Virgin mobile announced that they would move from EE to Vodaphone from 2021

“Virgin Media's mobile network will be powered by Vodafone's infrastructure from 2021, switching from the BT-EE network it has used for the past two decades. The world's first Mobile Virtual Network Operator (MVNO) launched in 1999 under the guise of Virgin Mobile and using what was then One2One's network”
ik9000
This doesn't fill me with confidence. Erosion of mobile competition. With Virgin mobile going onto Vodafone how does this even work? Then there's the internet side. I haven't heard great things about 02 on that front.
Why's that? There are 4 operators now and there would be 4 after a potential merger.

WRT the Vodafone thing, that could pose some challenges if they can't back out of the contract.

Either way, it's only ‘talks’ for now - similar talks happened with Vodafone a while back and nothing really came of it.
Virgin Mobile currently piggy backs on BT/EE mobile networks

Does it? It used to use EE, however they started switching to other hardware a couple of years ago and stopped using EE. Which is why I swapped my network to EE, because whatever Virgin Mobile were using was rubbish for signal where I live.
Yes, Virgin Mobile are a virtual provider running on EE's network. However, I believe there are some limitations on things like VoLTE and the lower frequency bands, but I'm not sure if that still applies.

There are only 4 physical networks in the UK: EE, O2, Vodafone and Three. Anything else is an MVNO. However, EE/Three and O2/Vodafone do share cell locations to some extent e.g. sites, masts, antennas in some cases. But that does not mean coverage will be equivalent in all areas as the different operators may deploy different hardware, spectrum or have no presence at all.