Virgin Media and O2 confirm £31 billion 'mega-merger'

Virgin Media and O2 are to merge to create a 31 billion media and telecoms giant, their parent firms have announced. Pic: Shutterstock

Liberty Global and Telefonica - the owners of Virgin Media and O2 respectively - had confirmed on Monday that they were in discussions over a possible merger.

The tie-up between the two companies is expected to create a major rival for BT, which owns EE, the UK's second largest mobile network.

It will bring together O2's 34 million customers on its mobile network with Virgin's 5.3 million broadband, pay-TV and mobile users.

The deal, which is expected to be finalised in the middle of 2021, subject to regulatory approvals, values Virgin Media at £18.7 billion and O2 at £12.7 billion.

In a statement, they said they will create a "full converged platform" for customers and will invest £10 billion in the UK over the next five years.

The 50-50 joint venture will deliver £6.2 billion worth of cost-saving synergies, the pair said. A cost synergy refers to the opportunity of a combined corporate entity to reduce or eliminate expenses associated with running a business. Cost synergies are realised by eliminating positions that are viewed as duplicate within the merged entity.

Mike Fries, chief executive officer of Liberty Global, said: "We couldn't be more excited about this combination.

"Virgin Media has redefined broadband and entertainment in the UK with lightning-fast speeds and the most innovative video platform. And O2 is widely recognised as the most reliable and admired mobile operator in the UK, always putting the customer first."

O2 - which also provides the network for GiffGaff, Tesco Mobile and Sky Mobile - is the UK's largest phone company.

Jose Maria Alvarez-Pallete, chief executive of Telefonica, said: "Combining O2's number one mobile business with Virgin Media's superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical.

"We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value."