O2 be a fly on the wall during BT and Vodafone's video calls: Telefónica's UK biz, Virgin Media officially merge
- Reference: 1588858204
- News link: https://www.theregister.co.uk/2020/05/07/virgin_media_and_o2_merger/
- Source link:
The combined provider will sell fixed-line, mobile, and paid television services, and would directly challenge the dominance of BT in the UK.
Telefónica [1]confirmed the existence of ongoing merger talks earlier this week , but minimised them, saying the firms were still in the negotiation phase, and it was unable "to guarantee, to this date, neither the precise terms nor the probability of its success".
The deal, which is expected to close in mid-2021 subject to regulatory approval, will create a combined entertainment and broadband provider in the UK, with 46 million subscribers and annual revenue of £11bn.
The bulk of these subscribers belong to O2, which has 34 million subscribers across the UK, and serves as the backbone for several MVNO mobile providers, including Giffgaff (which is owned by the same parent company), LycaMobile, and Tesco Mobile.
Meanwhile, Virgin Media boasts 14.6 million subscribers in the UK and Ireland markets across its broadband, fixed-line, and television products. It also has a further 3.3 million mobile customers, via its Virgin Mobile brand.
Unlike O2, which operates its own infrastructure, Virgin Mobile sits as an MVNO on the EE network, [2]acquired by BT back in 2014.
According to the parent companies, both firms intend to invest a collective £10bn in the coming five years, primarily centred on the nationwide provision of 5G and gigabit "full-fibre" broadband.
Equity in the joint venture will be split 50-50 between Liberty Global and Telefónica. Although Virgin Media is technically valued higher than O2 (£18.7bn versus £12.7bn), O2 boasts bigger annual revenues (£6.2bn versus £4.7bn). Furthermore, equity in O2 will be transferred to the joint venture on a debt-free basis, while Virgin Media brings with it £11.3bn in debt and "debt-like items".
Kester Mann, director of consumer and connectivity at analyst house CCS Insight, described the deal as a "blockbuster merger" that promises to transform the UK telecoms landscape.
"Each side gains crucial assets it severely lacks: a mobile network for Virgin and a fixed-line arm for O2," commented Mann, who added the deal is unlikely to be thwarted by regulators, due to the differing nature of both companies.
That's significant as a [3]previous acquisition attempt on O2 from Three parent Hutchison Whampoa was [4]halted by the European Commission over concerns it would adversely limit competition in the mobile telecoms market.
Mann expects this deal will have onward consequences in the wider market. "Vodafone, Three, Sky and TalkTalk will all be assessing their positions and further deal-making can't be ruled out," he said.
"Vodafone UK appears the biggest loser as the deal lays bare its weak position in the market for converged services. It also looks certain to scupper its virtual network partnership struck with Virgin Media in 2019."
It's not immediately obvious what will happen to the O2 and Virgin Media brands.
Analysts at Megabuyte said the deal "makes clear sense... combining significant fixed-line and mobile networks with, we assume, no significant regulatory hurdles given that BT's EE acquisition in 2016 was basically waved through."
It also commented that the "main loser" in the merger would be Vodafone: "With the deal creating a player that would vie for top position with BT in the UK comms and pay TV market on various metrics, as we noted earlier this week, the main loser from the proposed merger would appear to be Vodafone, which is now a distant fourth in the comms+pay TV market."
News of the deal comes after Telefónica released [5]its Q1 results [PDF] for the period ending 31 March 2020. Net profit plunged 56.2 per cent to €406m from €926m in the same period last year, prompting the firm to withdraw its 2020 financial guidance. ®
Sponsored: [6]Forrester Build a Digital Experience Portfolio
[1] https://www.theregister.co.uk/2020/05/04/o2_virgin_media/
[2] https://www.theregister.co.uk/2014/12/15/bt_to_acquire_ee_for_125bn/
[3] https://www.theregister.co.uk/2016/02/04/three_pledges_it_wont_hike_up_prices_if_it_gets_green_light_for_105bn_o2_merger/
[4] https://www.theregister.co.uk/2016/05/13/vestager_competition_is_good/
[5] https://www.telefonica.com/documents/162467/145816197/rdos20t1-eng.pdf/372489cd-ef30-78a1-6f15-4cdd5cd15266
[6] https://go.theregister.co.uk/tl/1936/-8554/forrester-build-a-digital-experience-portfolio?td=wptl1936
Re: Ha ha
"O2 with a network that's way behind anyone else and expensive too."
All the customers on GiffGaff, Tesco and many many more will disagree. In fact 02 MVNO's are amongst the cheapest. Add to that I have a choice of a decent O2 4g or a barely useable signal from the others, for me coverage was the main decider to go with Giff Gaff
Re: Ha ha
"In fact 02 MVNO's are amongst the cheapest"
Doesn't mean that the O2 network isn't behind the others.
Could mean O2 are sweating their assets and not investing in upgrades etc.
I've never had an O2 phone, i did have cellnet Pay as you go a long time a go, inspired by THOIC which turned out to be encouraged by News Corps NDS but any way.
Re: Ha ha
I won't - I moved from O2s just about acceptable network to GiffGaff, which was obviously the same network , but with less reliability (somehow) and 'ask the person sitting next to you on the bus - perhaps they can help...?' customer support. A plague on BOTH their houses.
I jumped ship to 3 and haven't looked back.
meh
Both companies were already in my black book as "do not use"... Should I merge them into a single entry?
combined 46 million subscribers ...?
34m + 14m + 3.3m doesn't equal 46m in any maths I know of. I get 51.3m. Am I missing something? Or do they expect 10% to say "fuck off" and defect (escape) to other services while the getting's good (i.e. new org, significant contract change, contract and exit fees don't apply)?
Re: combined 46 million subscribers ...?
You're missing that some Virgin Media customers will also be O2 customers already (presumably roughly 5m of them, based on the maths).
Re: combined 46 million subscribers ...?
"Am I missing something?"
Overlap.
Re: combined 46 million subscribers ...?
Exactly. I'm a virgin media customer and an O2 customer so would fit in the overlap.
Re: combined 46 million subscribers ...?
John Venn wants a word with you.
Branding...
VM + O2 = VOM² ?
Re: Branding...
VoMIT ?
I've had virgin cable for 20 years now - apart from the line dropping around once every 6 months for about 4 hours, it seems pretty stable. Virgin TV is OK - comparable to Sky (apart from Sky Atlantic). I haven't had any support issues and the deal I have is, to my eyes, pretty good (500Mb/sec broadband+all entertainment, sports and film channels + unlimited land line calls + unlimited everything Sim card for £99/month).
The O2 merger won't make much difference to me unless they start removing things.
Nah they will just put the price up and claim its going up with inflation.
Nope they will give you a FREE upgrade, then bump up the price.
What about the Corona surcharge?
Logical Next Move in the "comms+pay tv" "market"
Presumably will be for Vodafone and Sky to get together.
Re: Logical Next Move in the "comms+pay tv" "market"
That would be interesting as both have significant investment in broadband.
Re: Logical Next Move in the "comms+pay tv" "market"
Or Three and Sky.
Three are on record as being against quad play. But then so were O2.
And Three have just had a change of management.
One thing for sure - Sky will be looking closely at their MVNO contract with O2!
Re: Logical Next Move in the "comms+pay tv" "market"
But where do Sky go? EE is owned by BT. There's Vodafone, which is presumably still slated to carry Virgin Mobile from 2021 unless they can get out of it with a change of ownership clause in the contract. Or Three, who as you say look ripe for a merger or acquisition ... especially considering Li KaShing's previously stated desire for such a merger.
Re: Logical Next Move in the "comms+pay tv" "market"
"Three are on record as being against quad play. But then so were O2"
O2 had no choice in the matter, Both Telefonica & Liberty need the money and no one wanted to buy either (that would get through the regulators). This deal works out much better for VM than O2. TV packages are becoming dated with many people streaming from 2 + providers already (i have Netflix, Amazon, AppleTV & now Disney+, any others can FO!!!!) Who wants cables going in every room when the TV can just stream on demand from the web?
in a few years we won't even bother with home wifi as the 5G spec will allow our devices to just connect to the mobile phone network on our account and just work so no need for home wifi.
Re: Logical Next Move in the "comms+pay tv" "market"
EE and now this VM/O2 merger have shown that two international firms can come together to create a single UK provider.
Comcast have only just bought Sky, though, so I doubt they're in any mood to further complicate their investment. And Vodafone seem unlikely to offload their operations on their home turf.
Cellnet
"The combined provider will sell fixed-line, mobile, and paid television services, and would directly challenge the dominance of BT in the UK."
Bet BT are maybe regretting getting rid of BT Cellnet/O2 now.
So many other providers use O2 - Tesco for example. That's a lot of instant customers for VM.
Re: Cellnet
Bet BT are maybe regretting getting rid of BT Cellnet/O2 now...
You missed the bit where they own EE.
Re: Cellnet
And the cost of owning EE was to sell part of themselves to Deutsch Telekom. Splitting off O2 was a classic piece of BT top manglement short-sightedness. I suppose, however, they disliked that business as much as those who worked there disliked them.
Re: Cellnet
Ditching Cellnet was a long term solution to a mid-term debt problem. The good news for BT, though, is that EE has way more 4G spectrum than O2. The bad news is that O2 has a bit more 5G spectrum than EE.
Re: Cellnet
Ditching Cellnet was a long short term solution to a mid-term debt problem.
FTFY
I wonder if there are any old BT hands still around in O2. If so there'll be a touch of schadenfreude around the virtual office today.
There are indeed, though they've been whittled down over the years - legacy benefits are expensive.
And the losers are...
the customers.
This has to be paid for after all.
Re: And the losers are...
Nice of Virgin to bring all their debt to the party.
Re: And the losers are...
How much debt does Liberty Global have? Lots and lots and lots I'll bet.
Can they service it without [cough][cough] aquiring a lot of nice juicy assets as almost zero cost? Then they can sell those nice juicy assets to service the debt.
Re: And the losers are...
The thing about debt is that taxes are paid after costs like debt etc. More debt, less taxes. If you have another business that is profitable and pays a lot of tax, you can offset some that tax and cost of the new company by paying off that debt to your offshore services company and paying far less tax to the UK. Its a Win Win in the corporate world. Branson is a master at it (not saying he's involved at all here).
The roundabout
A while back Telefonica offloaded its cable operations in Germany to Liberty Global which, in turn offloaded them to Vodafone. Only a matter of time before this happens in the UK?
Think about the poor sponsors
What will the O2 now be known as?
Perhaps the group could merge with British Airways and then it might be called the "O2 BA Virgin"
Virgin Mobile moving off EE
Well, that's a bit of a bugger for this deal then:
https://www.theregister.co.uk/2019/11/06/virgin_and_vodafone_announce_mvno/
nationwide provision of 5G and gigabit "full-fibre" broadband
and if you wondered WTF you need 5G and 1Gb "full fibre" broadband (up to), well, shit, why should reasonable/awkward questions stand in the pathway of unstoppable progress, that's why! And I'll give you perfectly good REASONS why: "other countries mumblemumble so we can't lag behind" / "mass-surveillance in real-time" (for those tinfoil hats replace "surveillance" with "potential virus outbreak contagion"), and let's not forget "3D, 5-hr long cat porn videos / linux installations downloaded IN 3 SECONDS!". Did I mention "convergence & cost optimisation", aka mass redundancies for our ex-valuable employees, we wish them all the best in their new employment career elsewhere, etc.?
Oh gawd, I hope not. When I worked there senior O2 management struck me as being like ADHD children. Desperate not to be running a telco they’d hatch all sorts of crazy schemes they’d show hyperactive levels of interest in, only for the attention deficit to swiftly kick in and the once darling idea that shaped the future of the business forgotten after mere weeks.
The O2 Board is very much the Peter principle in action. They’re fortunate to be on top of a business that basically runs itself, because if they had to do it, it would simply fail.
Ha ha
Two shit companies get together to create an even more shit one.
Virgin lying about speeds, terrible customer service. O2 with a network that's way behind anyone else and expensive too.
As much as I'm not Vodafone's biggest fan the network is very good, especially for data and the issues we've had with broadband (caused by BT cutting through a cable) we're dealt with reasonably well.