Virgin Media and O2 be a part of forces to tackle BT

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  • 7 Might 2020
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Back of Virgin media van Image copyright Virgin Media

Cellular operator O2 and broadband big Virgin Media are to merge, creating one of the UK's largest leisure and telecoms companies and a serious rival to BT.

Liberty International, which owns Virgin Media, and Spain's Telefonica, which owns O2, stated that they had agreed phrases for becoming a member of forces.

Shopper group Which? referred to as on the Competitors and Markets Authority to research the deal.

It stated the tie-up "might have a big impression on shoppers".

Which? added: "Neither provider stands out in our current customer satisfaction surveys, and any merger should only be allowed to go ahead if it delivers constructive outcomes for shoppers."

O2 has about 34 million mobile phone customers, while Virgin has about six million broadband and cable TV clients and one other three million cellular customers.

As well as having its personal subscribers, O2 supplies the network for Tesco Cellular, Giffgaff and Sky Cellular.

Telefonica chief government Jose Maria Alvarez-Pallete stated: "Combining O2's primary cellular enterprise with Virgin Media's superfast broadband community and leisure providers might be a game-changer in the UK, at a time when demand for connectivity has never been larger or more important."

'Higher breadth'

Regardless of Which?'s considerations concerning the deal, some analysts stated clients have been set to profit by accessing extra providers, although it is unclear whether value savings from the tie-up can be passed on to shoppers.

Ernest Doku, mobiles skilled at worth comparability website, stated he didn't anticipate clients to lose out.

"Will probably be fascinating to see what this implies for present clients when it comes to merchandise and access to additional providers, similar to O2 Priorities.

"For all clients there's the thrilling prospect of higher breadth of leisure and quicker speeds to look ahead to."

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Karen Egan, telecoms analyst at Enders Analysis, advised the BBC's Immediately programme the deal was "a fortuitous marrying of goals" for the two mum or dad corporations.

Telefonica was "keen to monetise" its stake in O2, while Liberty International had long believed in combining fixed-line and cellular networks, she stated.

The brand new merged company would now have the ability to "diversify and match some of BT's progressive products", she added.

Virgin Media and O2 are celebrating the creation of a strong competitor to BT as a converged communications business. They appear confident that their merger shall be waved via by the competition regulator - but that assumes the deal is self-evidently good for shoppers.

Will eradicating one participant from the telecoms market actually imply higher costs and improved service for Virgin and O2 clients? The companies are insisting that it'll give them the assets for the large job of extending full fibre broadband and 5G throughout the UK, promising to spend £10bn over the subsequent five years. But the shopper group Which? isn't convinced, pointing to the patchy customer support report of each companies and calling for an inquiry.

Having allowed a merger between BT and EE in 2016, it seems unlikely that the Competition and Markets Authority will block this deal. But Virgin O2 - or whatever model they choose - can nonetheless anticipate loads of regulatory scrutiny, even after their marriage is permitted.

The companies stated O2 can be valued at £12.7bn and Virgin Media at £18.7bn, each on a total enterprise value basis.

"O2 [is] to be transferred into the three way partnership on a debt-free foundation, whereas Virgin Media to be contributed with £11.3bn of internet debt and debt-like gadgets," the companies stated in a joint statement.

Telefonica tried to promote O2 to the owner of Three, CK Hutchison, for £10.3bn in 2015. Nevertheless, that deal was blocked by the European Commission over considerations that it might have left simply three major cell phone operators in the UK.