O2 is in talks to merge with broadband and television provider Virgin Media, which would create one of the UK’s largest entertainment and telecommunications companies.
Telefonica, the Spanish company that owns O2, has confirmed that it is in talks with Liberty, the US owner of Virgin Media.
“The process initiated by the two parties is in a negotiation phase, which cannot guarantee, to date, either the precise terms or the likelihood of its success,” said Telefonica.
Telefonica and Liberty had been trying for some time to offload part of their activities.
O2 is the UK’s largest mobile operator and a tie-up with Virgin Media would create an even bigger rival for BT, which has the UK’s second-largest network, EE. BT has 28 million mobile phone contracts compared to 34 million for O2.
BT is already under pressure after seeing its share price drop by almost half in the past 12 months. Its shares are now languishing at where they were a week after the company was privatized in 1984.
“This suggests that the market is worried about how BT can compete on many fronts – fixed and wireless telecommunications, broadband, TV and sports broadcasts,” said Russ Mold, chief investment officer at AJ Bell.
“He has a lot of debt, a big pension deficit and is surrounded by the regulator Ofcom on one side, a multitude of competitors on the other and value-sensitive clients on the other, all capable of switching from one service provider to another. another. “
The merger would add 5.3 million additional broadband, television and telephone customers to the O2 operation that provides the network for GiffGaff, Tesco Mobile and Sky Mobile.
Telefonica began to consider selling O2 in 2015, but a planned takeover by CK Hutchinson, owner of the Three mobile brand, was blocked by the European competition watchdog.
Discussions between O2 and Virgin Media also raise questions about the future of Virgin’s mobile operations, which were due to be taken over by Vodafone later this year.
Paolo Pescatore, Technical and Media Analyst at PP Foresight, said: “It’s an intriguing decision.
“Of course, this is more likely to appease regulators than two mobile operators getting together.
“Let’s also not forget that the parents of both companies have wanted to get rid of these assets for some time.
“Therefore, there is more than just convergence and competition with BT and Sky.”
Additional reports by the PA
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This notice was published: 2021-12-13 13:44:13