Virgin Media to Merge with O2

Liberty Global and Telefónica have agreed to merge their U.K. operations, Virgin Media and O2, into a 50-50 joint venture.

The transaction is expected to close in 2021. The combined firm will have more than 46 million video, broadband and mobile subscribers, generating revenues of £11 billion. The board overseeing the JV will consist of four executives from Liberty Global and four from Telefónica.

“Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the U.K., at a time when demand for connectivity has never been greater or more critical,” said José María Álvarez-Pallete, CEO of Telefónica. “We are creating a strong competitor with significant scale and financial strength to invest in U.K. digital infrastructure and give millions of consumer, business and public sector customers more choice and value. This is a proud and exciting moment for our organizations, as we create a leading integrated communications provider in the U.K.”

Mike Fries, CEO of Liberty Global, noted, “Virgin Media has redefined broadband and entertainment in the U.K. with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the U.K., always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today. We’ve seen the benefit of FMC first-hand in Belgium and the Netherlands. When the power of 5G meets 1 gig broadband, U.K. consumers and businesses will never look back. We’re committed to this market and are right behind the government’s digital and connectivity goals.”

O2 is valued at £12.7 billion and Virgin Media at £18.7 billion. Both parties expect to receive net cash proceeds at closing following a series of recapitalizations that will generate £5.7 billion in proceeds for Telefónica and £1.4 billion for Liberty Global (after an equalization payment to Telefónica of £2.5 billion).