Money

Liberty Global in talks to merge Virgin Media with O2


John Malone’s Liberty Global is in talks to combine its UK-based Virgin Media business with telecoms operator O2, a move that would create a stronger competitor to incumbent BT, according to people with direct knowledge of the matter.

The combination, if sealed, would involve creating a joint venture merging O2, which is controlled by Spain’s Telefónica, with Virgin Media, one of the people said. The venture would be owned 50-50 by the two companies, with Liberty Global making a payment to Telefónica to equalise the ownership, the person added.

The deal would bring together the 34m customers on O2’s mobile network, the largest in the UK, with brands including Tesco Mobile and Giffgaff, with Virgin Media, which has 5.3m broadband users as well as a large base of pay-TV and mobile users. 

Liberty Global, which has been trying to consolidate or sell most of its wireless operations across Europe, sees the UK’s exit from the EU as an opportunity to combine with rivals without facing opposition from regulators in Brussels, a person close to Virgin Media said.

The company, which was founded by billionaire John Malone, who remains its controlling shareholder, is sitting on more than $7bn in cash from asset sales that it may deploy to structure a deal. 

Heavily indebted Telefónica has been trying to offload O2 for years. In 2015, Three, CK Hutchison’s mobile arm, agreed a £10.25bn takeover to buy the business but European regulators blocked the deal a year later. 

BT managed to buy mobile provider EE in a £12.5bn deal in 2015, having opted against a takeover of O2.

O2’s financial performance has since improved and Telefónica has committed to staying in the UK, but the Spanish company has never ruled out any dealmaking.

Liberty Global is also thought to have approached Vodafone about a combination, but those talks are not active at this time, one person said. A deal to combine Virgin Media with Vodafone’s UK business has been discussed in the past but ended owing to differing opinions about the value of the respective companies.

However, Liberty Global and Vodafone have forged a close relationship in the past five years and agreed to form a joint venture in the Netherlands in 2016 by combining cable and mobile networks. In the UK, Vodafone and Virgin Media signed a deal last year to use each other’s networks which was viewed as a potential first step in a full merger. 

Liberty Global, Vodafone and Telefónica declined to comment. Bloomberg first reported news of the talks. 

Liberty Global has been seen as a potential kingmaker in British telecoms having sold large parts of its European empire to Vodafone to focus on a handful of markets including the UK. It has $7.4bn of cash according to its last accounts and has strengthened the executive team at Virgin Media to add executives with mobile and investment banking experience. 

Unlike most main European markets, Britain still has four mobile phone networks but only one integrated broadband and mobile player in the form of BT.

Liberty Global chief executive Mike Fries has hinted at a deal in recent earnings calls while Lutz Schüler, who took over as chief executive of Virgin Media last year, told the Financial Times he had not taken charge of the British cable company “to window dress”.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.