Liberty Global and Telefonica have reached an agreement to merge their U.K. operations in a 50-50 joint venture.
This move brings together the country’s largest mobile operator, O2, with cable operator Virgin Media and its MVNO Virgin Mobile.
The combined subscriber base of the two companies, as of the end of 2019, was 46 million, and they would have combined annual revenue of £11 billion ($13.5 billion). Once complete, the combined entity will have an enterprise value of almost £31.5 billion.
Liberty Global and Telefonica noted that the transaction is expected to close by mid-2021 and is subject to regulatory approvals, consummation of the recapitalizations, and other customary closing conditions.
“Combining O2 with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK., 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 U.K. digital infrastructure and give millions of consumer, business and public sector customers more choice and value,” Telefonica CEO, Jose Maria Alvarez-Pallete, said.
Mike Fries, CEO of Liberty Global, added: “We couldn’t be more excited about this combination. Virgin Media has redefined broadband and entertainment in the UK. 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. With Virgin Media and O2 together, the future of convergence is here today.”
Telefonica and Liberty Global said they will ensure that the JV will benefit from the scale and complementary expertise of each partner. To accomplish that objective, the parties have agreed to provide a suite of services to the JV after closing. These services will principally consist of IT and technology-related services, procurement, brand management and other support services.
The two firms also said that the JV is expected to generate significant operating benefits, with estimated run-rate cost, capex and revenue synergies of £540 million on an annual basis by the fifth full year post closing. The key expected sources of cost and capex synergies include the use of existing infrastructure to provide services for each entity’s customers at lower cost compared to standalone capabilities and the migration of Virgin Media mobile traffic to Telefonica UK’s network, among others.
O2 launched its 5G network in the U.K. in October 2019. O2’s 5G network was initially available in certain areas of Belfast, Cardiff, Edinburgh, London, Slough and Leeds. The carrier said that the initial focus for its 5G network is on highly populated areas including railway stations, shopping centers and sports stadiums.
The telco said that its 5G network will be live in a total of 50 cities across the U.K. by summer 2020.
O2’s 5G network infrastructure is being rolled out in partnership with Ericsson and Nokia.
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