Liberty Global’s Virgin Media and Telefonica’s O2 merge UK operations

Liberty Global’s Virgin Media and Telefonica’s O2 merge UK operations

Liberty Global’s UK cable operator Virgin Media, is set to merge with O2, Telefonica’s mobile carrier. Liberty Global and Telefonica will undergo a 50-50 joint venture. The deal is currently valued at £31.4 billion ($38.9 billion), with Virgin Media valued at £18.7 billion and O2 valued at £12.7 billion. The deal between the two telecoms companies will be finalized by mid-2021.

The merger could place noticeable pressure on BT – which has bought EE, the UK’s largest mobile network operator in 2016, and also competitor carrier Comcast owned Sky and Vodafone. Philip Jansen, CEO of BT deemed the merger as a sensible move that will converge fixed and wireless broadband networks.

Paolo Pescatore, an analyst of tech media and telco at PP Foresight commented that this is a rather intriguing move, and it is more probable it will appease regulators that two mobile operators – Liberty Global and Telefonica – are joining forces.

Jose Maria Alvarez-Pallete, CEO of Telefonica indicated that the deal would be “a game changer in the UK, at a time when demand for connectivity has never been greater or more critical.” He added that both companies are working on creating a forceful competitor with significant scale and financial abilities to invest in the UK’s digital infrastructure and offer customers greater value and choice.

During the morning deals, shares of Telefonica increased more than 1%, while on the other hand BT stock slumped down over 7%, causing BT to announce later on that day, that they would scrap all dividend payments until 2022 so they can manage through the pandemic.

The newly formed alliance between Liberty Global and Telefonica will have a total of 46 million broadband, mobile and video subscribers as well as £11 billion in revenue. The merger will allow Virgin Media to utilize O2’s extensive experience in developing next generation 5G mobile networks, which is projected to be an important driver of sales for telecom firms in the future.