British Telecoms 02, Virgin Media To Merge In ?38-bn Deal

Telecommunications group Telefonica Thursday announced the merger of its British unit O2 and Virgin Media, owned by US cable giant Liberty Global, into a company worth more than 31 billion pounds.

O2 and Virgin Media are now rivals and a merger would give them a stronger combined package of services that could shake up the British telecommunications market.

Anticipated savings of 6.2 billion pounds from the deal pushes its value close to 38 billion pounds (43 billion euros, $46.6 billion).

The "50-50 joint venture brings together Virgin Media, the U.K.'s fastest broadband network, and O2, the country's largest mobile platform," Spain's Telefonica said in a statement.

A tie-up would marry O2's 34 million mobile phone customers with Virgin's 5.3 million broadband, pay-TV and mobile users, heaping pressure on highly-indebted British operator BT, which owns the EE mobile network.

The deal values O2 at ?12.7 billion and Virgin Media at ?18.7 billion, the statement said, for a combined total of ?31.4 billion.

Telefonica head Jose Maria Alvarez-Pallete said the deal "will be a game-changer in the U.K., 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," he added.

The transaction, which is subject to regulatory approvals, is expected to close around in mid-2021.

The announcement comes after Telefonica in November announced restructuring plans to focus on its key markets in Spain, Britain, Germany and Brazil while spinning off its Latin American operations through a separate unit.

The change in strategy came after a year in which the company posted a 66-percent slide in net profit.