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Virgin Media and O2 merger could change the telecoms market

Virgin Media and O2 merger could change the telecoms market

Virgin Media and O2 are rumoured to be in talks, potentially discussing a merging that will combine their technology and customer base to take a bigger share of the telecoms market.

The two parent companies –– Liberty Global, which owns Virgin Media as well a 10% stake in ITV, and Telefonica, the Spanish telecoms company that owns O2 –– are understood to be in talks to discuss combining their assets in a joint venture.

In a comment in The Telegraph, the Madrid-listed owner of British network O2 confirmed that talks with Liberty Global were still ongoing, with no specific outcome guaranteed.

“The process started between both parties is in a negotiation phase, with no guarantee, at this point, precise terms or its probability of success,” Telefonica said.

In what could be up to be a $30bn (£24bn) deal, the proposed 50:50 joint venture between the two companies could create a telecoms mega-giant in the UK that would rival BT.

Collaboration and the sharing of resources isn’t exactly unprecedented. Last year, Vodafone and Virgin Media signed a deal in the UK to use each other’s networks, and TalkTalk has a similar deal with O2 which lets them use their network for mobile services. However, this deal would be completely different, potentially redefining the market as two of the UK's biggest telecoms firms merge.

What would this mean for customers?

If Virgin Media and O2 were to combine their resources, this would result in Virgin Media gaining access to 34 million O2 mobile customers –– the largest of any network in the UK –– and O2 connecting with 5.3 million broadband, pay-TV and mobile customers.

O2 also provides the network for Tesco Mobile, Giffgaff and Sky Mobile, with the latter being a major competitor for Virgin Media in the broadband and pay-TV market.

A deal between the two companies would significantly challenge other providers in the telecoms and pay-TV market. BT and Sky have a deal in place that allows the providers to share rights to the UK’s Premier League, giving customers of one provider to add on a subscription to the other for essentially the same price.

If the deal were to go through, O2 customers would be able to buy more than just mobile services, giving them access to broadband and TV packages as well. Meanwhile, Virgin Media would be able to fold in O2 customers into its already-existing mobile services packages, causing a dramatic increase in its share of the market.

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