Telefonica has confirmed talks with Liberty Global on a possible combination of their activities in the UK, bringing together mobile operator O2 UK and the cable operator Virgin Media.This follows an earlier report from Bloomberg, which said the companies could announce a deal in the coming week.
Telefonica said they were still in a negotiation phase, and it could not provide more information on the precise terms or the probability of success.
The deal would help Telefonica reduce its debt and give O2 a position in the fixed market, in order to offer converged fixed-mobile packages and compete better with rivals BT and EE. Virgin Mobile already has its own MVNO, on the EE network, but a merger with O2 would lead to significant cost savings and scale advantages. Liberty Global has made similar deals in Belgium, where it acquired mobile operator Base, and in the Netherlands, where it has the VodafoneZiggo joint venture with Vodafone.
New Street Research valued a potential takeover of O2 UK at USD 15.8 billion, assuming 50 percent of the GBP 5.2 billion in cost savings of combining with Virgin goes to O2 owner Telefonica.
Telefonica previously tried to pursue a merger of O2 with 3 UK. However, the sale was blocked by competition regulators in 2016.
