Numerous reports suggest that John Malone’s Liberty Global is in talks with Spanish telco Telefónica about merging its UK multiplay operator Virgin Media with Telefónica’s O2 mobile business.
Bloomberg and Reuters are reporting that Telefónica has been weighing options for the mobile business since 2016 when a previous £10.3 billion deal takeover of O2 by Three UK, controlled by CK Hutchison Holdings, was blocked by European antitrust regulators, banking sources said.
An agreement would end uncertainty around O2, which has for some time been suggested as a candidate for a sale or stock market listing.
The reports suggest that a joint-venture end result would be a probable outcome.
Telefónica took control of O2 in 2006 and tempted plenty of new business by having exclusive sales rights to Apple’s iPhone at the time.
Telefónica first mooted that it would be happy to consider possible merger options for O2 in November 2019 when it announced a turnaround plan to cut costs and boost revenues.
Liberty Global, however, exited its cable divisions in Germany and central Europe in 2019 when it sold the businesses to Vodafone for $22 billion.
Telefónica is set to announce its quarterly earnings this coming Thursday, May 7th.
Virgin Media has a MVNO cellular division in the UK which currently uses BT’s networks but is scheduled to shift to Vodafone in 2021.
A merger/joint-venture between the pair would be the biggest in the UK telecoms sector since 2015, when BT paid £12.5 billion for rival EE.
Investment bank Exane/BNPP in a flash note to clients said: “The relative weak position of both would suggest a deal makes a lot of strategic sense at this juncture [and] is a better outcome for both than the status quo.”