Liberty Global and Telefonica have agreed to combine their UK operations in a deal that will create a new giant in the country’s telecommunications industry.
Liberty Global’s cable operator Virgin Media will merge with Telefonica’s mobile carrier O2 in a 50-50 joint venture between the two firms. The deal is valued at £31.4 billion (US$38.9 billion), with O2 worth £12.7 billion and Virgin Media valued at £18.7 billion. The transaction is expected to close by mid-2021.
The combined company could put pressure on BT, which itself bought EE, Britain’s biggest mobile network operator, in 2016, as well as rival carrier Vodafone and Comcast-owned Sky. BT CEO Philip Jansen called the merger a “sensible move” that “follows our strategy” of converging fixed and wireless broadband networks.
“This is an intriguing move,” said Paolo Pescatore, a tech, media, and telecom analyst at PP Foresight. “For sure, it is more likely to appease regulators than two mobile operators coming together.”
“Let’s not forget the parents of both companies have been keen to offload these assets for a while. Therefore, there is more to this than simply convergence and competing with BT and Sky.”
“Neither company is immune to the driving need for a converged network and services,” Pescatore added. “This is the next battle ground in the UK”
Telefonica CEO Jose Maria Alvarez-Pallete said the deal would be a “game-changer in the UK, at a time when demand for connectivity has never been greater or more critical.” The coronavirus pandemic has led to increased demand for internet services as people across the UK have had to comply with lockdown measures.
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