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.