UK telecoms market set for significant shakeup as O2 and Virgin Media discuss potential merger

While discussions are at an early phase, the deal has the potential to have a huge impact on the UK’s connectivity market
UK, Virgin Media, O2, Telefonica


The UK telecoms sector could be set for an emphatic shake up, as two of its biggest players discuss the possibility of a merger, according to reports in the press.

News agency Reuters claims that senior executives from Liberty Global and Telefonica are in talks over the possibility of merging their UK subsidiaries, in a move that would redefine the boundaries of the UK’s telecoms sector.
The proposed deal would see the UK’s third largest mobile network operator, O2 (Telefonica), merge with the country’s second largest fixed line, full fibre network owner and provider, Virgin Media (Liberty Global).

The prospective merger would form an entity with the size and scope to challenge BT in the UK on both fronts, with BT the only other telco to operate as a mobile network operator (EE) and a fixed line fibre network owner (Openreach). O2 has been somewhat treading water in the UK, since its proposed £10.3 billion takeover of Three UK was blocked by regulators in 2016.

While neither O2 or Virgin Media have commented on the proposed move, sources familiar with the matter told Reuters that the two companies were discussing the possibility of forming a joint venture together, that would see the two players each take a 50 per cent stake.

While 02 is the UK’s third largest mobile network operator in terms of number of subscribers, it consistently ranks either third or fourth in terms of overall network speed, network availability and customer satisfaction. Indeed, recent reports by Opensignal have shown somewhat of a gulf opening up between the average network speeds of the UK’s top two MNO’s, EE and Vodafone, and that of their rivals O2 and Three.

The prospective merger would offer O2 the chance to inject some investment into its UK mobile network operations while simultaneously offering parent company Telefonica the opportunity to reduce its debt pile, which currently stands at over $37 billion.   

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