Virgin Media and O2 join forces to take on 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 many 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 ought to only be allowed to go ahead if it delivers constructive outcomes for shoppers."

O2 has about 34 million cell phone customers, while Virgin has about six million broadband and cable TV clients and another three million cellular customers.

In addition to having its own subscribers, O2 offers the network for Tesco Cellular, Giffgaff and Sky Cellular.

Telefonica chief government Jose Maria Alvarez-Pallete stated: "Combining O2's number one cellular enterprise with Virgin Media's superfast broadband network and entertainment providers shall be a game-changer within the UK, at a time when demand for connectivity has by no means been higher or extra important."

'Higher breadth'

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

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

"It is going to be fascinating to see what this implies for present clients when it comes to products and access to additional providers, reminiscent of O2 Priorities.

"For all clients there's the exciting prospect of larger breadth of leisure and quicker speeds to sit up for."

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Karen Egan, telecoms analyst at Enders Evaluation, advised the BBC's At the moment programme the deal was "a fortuitous marrying of aims" for the two mum or dad corporations.

Telefonica was "eager 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 be capable of "diversify and match some of BT's revolutionary products", she added.

Virgin Media and O2 are celebrating the creation of a strong competitor to BT as a converged communications enterprise. They appear assured that their merger can be waved by means of by the competitors regulator - but that assumes the deal is self-evidently good for shoppers.

Will removing one player from the telecoms market actually mean 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. However the shopper group Which? is not convinced, pointing to the patchy customer support document of both companies and calling for an inquiry.

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

The businesses stated O2 can be valued at £12.7bn and Virgin Media at £18.7bn, each on a complete enterprise worth 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 assertion.

Telefonica tried to promote O2 to the proprietor 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 mobile phone operators within the UK.