O2 and Virgin Discussing Merger

Mobile network O2 is in talks to merge with Virgin Media to create the UK’s largest telecoms provider.

Telefónica, the Spanish owner of O2, and Liberty Global, owners of Virgin Media, are discussing combining their UK assets in a joint venture. A combined company would rival BT—which also owns EE—for dominance of the broadband and mobile market.

O2 currently has 34 million users on its network, making it the UK’s largest mobile operator. Virgin Media has 5.3 million broadband, pay-TV and mobile customers.

Telefónica has been looking for a buyer of O2 since 2015 when a planned £10.25 billion takeover of the company by Three owner Hutchison Whampoa was blocked by the European competition regulator. A merger of O2 and Virgin Media is unlikely to run into similar problems, as they primarily operate in different markets (O2 in mobile and Virgin Media in home broadband and TV).

Telefónica said in a statement: "In the event of a satisfactory agreement on this potential transaction, Telefónica will communicate such information to the markets.”

Virgin Media has previously discussed a merger with Vodafone. Although those talks didn’t progress further, in November it was announced that Virgin Mobile would end its 20-year partnership with EE and use Vodafone’s network infrastructure for five years from late 2021. It’s unknown if the transfer would go ahead in the event of a Virgin-O2 tie-in, or if Virgin Mobile would use O2’s network instead.

Another stumbling block would be Sky Mobile, which uses O2’s MVNO platform, and would then be drawing mobile connectivity from Virgin Media, its direct rival in the pay-TV market.

The discussions will have no immediate impact on O2 and Virgin Media customers, although they will see changes down the line if the merger goes ahead. Reportedly, a deal could be announced as early as next week although the merger itself could take months or years to finalise.