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O2 UK and Broadband ISP Virgin Media Reportedly in Merger Talks UPDATE

Friday, May 1st, 2020 (7:25 pm) - Score 11,882

The owners of fixed cable TV and broadband ISP Virgin Media UK (Liberty Global) are reportedly discussing the possibility of a merger with the owners of mobile operator O2 (Telefonica). Assuming the two sides are able to reach an agreement then it’s claimed that a deal “could be announced as soon as next week.”

According to Bloomberg‘s sources, no final decisions have been made and the talks could still fall apart or be delayed. At this point regular readers of ISPreview.co.uk will recall that, over the years, Virgin Media has been linked to more than a few potential mergers or asset swaps (Vodafone in particular has long been a big talking point and so has O2here), although so far none have ever come to fruition.

In theory it makes perfect sense for Virgin Media to combine their fixed broadband business with a dedicated mobile operator, which would enable them to more directly target arch rival BT in the retail space. BT has invested heavily to create a new all IP converged network, where mobile and fixed line connectivity could become almost seamless, although not all consumers are keen on such solutions. Likewise Virgin’s fixed lines could help to fuel data capacity for 5G mobile etc.

On top of that if Virgin Media does proceed with their often mentioned proposal to separate the fibre network from their retail ISP business (e.g. the fibre network would go wholesale under the ‘Liberty Networks‘ company and expand into new areas via FTTP) then having a full mobile side would help to boost their consumer proposition.

However, one potential problem could be the fact that Virgin Media has already signed a 5-year contract with Vodafone, which will see the latter taking over their Mobile Virtual Network Operator (MVNO) platform from EE (BT). Under that deal Virgin Mobile will start to transition on to Vodafone’s network from the end of 2021 (here).

Suffice to say that if any major changes are planned to the Vodafone arrangement then they’ll have to happen soon in order to avoid bigger complications further down the line. Preparing for a switch of mobile platform is a very complicated process, which requires plenty of preparation so as to avoid upsetting existing customers (TalkTalk has some experience of this and eventually got out of the MVNO game altogether).

Telefonica has of course been looking to float or sell O2 UK for some years now, although in the past year they appeared to have given up on that course and were instead focusing upon a plan to improve their UK network. At this point readers may recall that a proposed merger between O2 and Three UK failed following competition concerns by the EU and Ofcom, although a deal between Virgin Media and O2 seems unlikely to run into any big problems (two different types of network).

UPDATE 2nd May 2020

One other thought we had concerns Sky Broadband, specifically their Sky Mobile division as that uses an O2 based MVNO platform. More than a few reports have suggested that Sky could become an ISP customer of Liberty Networks in the future, assuming that project proceeds.

In any case the above deal could mean Sky also taking mobile connectivity from direct rival Virgin Media, which might prompt them to switch supplier to Three UK or Vodafone.

UPDATE 4th May 2020

Now it’s official (here).

Leave a Comment
44 Responses
  1. Avatar dave

    Virgin Media should by Vodafone’s MNO as well then combine the two networks to have something that can actually compete with EE.

    • Avatar 125us

      I don’t think Ofcom will countenance a reduction in the number of mobile operators – certainly not an effective merger of O2 and Voda.

  2. Avatar A_Builder

    Interesting, very interesting.

    That makes a lot more sense of what is going on. It has been pretty evident for a while that something was afoot.

    I’d expect to see some pretty rapid upgrade roadmap announcements if this thing goes through.

    • Avatar joe

      All assuming comp rules don’t sink it.

    • Avatar A_Builder

      @Joe

      I don’t think comp rules will sink it TBH.

      VM are in a strange position ATM with a network that is neither fish nor fowl. Some would say just foul……OK apart from the new FTTP bits.

      I don’t think anyone knows quite how to treat the thing as an entity. OFCOM should actually try and encourage a different approach to leverage what is in the ground with the HFC part of the network just as OR are doing with the FTTP rollout recycling ducts / power / backhaul.

      I’d be open minded. With no change of investment tack VMs HFC will be footnote in history within 5 years with the current urban FTTP build rates.

      I think to get past OFCOM there will have to be a commitment to either D4 or more FTTP. If I was them I would go down the FTTP route (queue up usual FTTCoid arguments about costs vs reach) as it is more future proof and leave D4 to where full FTTP is too expensive.

      As I keep saying on here, VM have to start doing something fast otherwise they are going to be going from a standing start where OR were a couple of years ago. Commercially you don’t wait till you are overtaken and then play a frantic game of catch up……..

  3. Avatar ronaldmcdonald

    Will this affect Tesco customers as Tesco use 02 network ???

  4. Avatar James

    I thought Sky were looking to buy o2

    • Avatar Pezza

      No that was years ago, when they were looking to enter the cellular market they were thinking of buying someone, but then just decided to become an MVNO instead as it’s cheaper, gives them more money to spend on sports then, they spend several billion sterling on football rights every three years.

  5. Avatar Matt

    Hmmm… Interesting news, will be watching closely.

    Currently an EE customer for my mobile and pretty much no plan to change that anytime soon, I was looking at Virgin Mobile as an option for someone else in my household who currently is on Three, but stepping cautiously as there is limited coverage from all mobile providers around here and the worst of the bunch is Vodafone and O2 (due to them pointing transmitters away from the area instead of towards it (dur)

    So the deal with Vodafone was of concern, O2 share the same mast and equipment with Vodafone.

    EE is pretty good, specially for me as I have access to 800Mhz spectrum when its needed.

    Not sure what I think of this, O2 sure has lost its reputation over the years, don’t know if Virgin will be good or bad for something thats been getting but still needs more TLC.

    • Avatar Tim

      EE only have 5Mhz (paired) 800Mhz. Both O2 and Vodafone have 10Mhz (paired). So no the O2 and Vodafone have more “indoor/rural” capacity.

    • Avatar Matt

      I’m well aware but as I said above, its when needed, I get 1800Mhz around pretty much the whole house and even 2600Mhz in the back, I got a Vodafone sim today and couldn’t pickup any 800Mhz only very weak 2100Mhz for LTE and thats after I forced device to get LTE only.

      I had O2 for a couple of weeks here back in November and could barely get signal around the house.

      When Vodafone and O2 started there site sharing agreement this area had a set of sectors for each network next to eachother on high rise tower block across the estate but then they merged to just the one tower and changed the direction the panels faced leaving half the estate without signal and its not changed since, spo obviously priority was elsewhere.

      Also got to add, having 5Mhz more capacity on the 800Mhz band is not exactly something to brag when thats carrying a large majority of the customers, as I said, my device only falls to 800Mhz in my kitchen (concrete walls) and never see it out and about, EE seems to balance their majority over the two sets of 1800mhz and the higher bands (2100 & 2600)

    • Avatar Stephen Wakeman

      …and the worst of the bunch is Vodafone and O2 (due to them pointing transmitters away from the area instead of towards it (dur)

      This is unusual. Main cell sites are usually set up to be omni-directional. A mobile network isn’t like a terrestrial TV network where there are transmitter facings. To operate, the connection is bi-directional because the mast has to transmit AND receive in order to provide the service.

      Unless it is an unusual installation and the location you’re talking about is on the fringes of a low population area, or indeed a sparse population, low density, deep rural area, then I find it unlikely that directionality would be the cause of your coverage problems.

    • Avatar Magtt

      Hey Stephen, even though its omni-directional the core of the signal will broadcast from the front of the panel so no likely to get much distance from it when located to the side of it say.

      the are area is pretty dense, not rural, I think they just want to cover the A road running besides it further rather than push signal into the housing area. (kinda makes sense)

      Maybe a 4th sector will added at some point.

    • Avatar Tom

      When Vodafone/O2 got upgraded in my area the sectors are two on a few masts missing the main catchment areas of the towns but ensuring the roads are fully covered so you are not the only one to experience a decrease in performance since a refresh
      Also another one vodafone and o2 have batteries in the cabinets to keep the mast online in a local power outage whereas EE/3 do not and always go down in power cut does anyone else experience this and why does it happen in this day and age?

  6. Avatar Scotty

    This could be a really interesting move. With Vodafone only having CityFibre and any purchase of VM suddenly off limits it may limit their Consumer Broadband expansion in the medium term whilst also having a negative impact on their mobile business.

    I can see Virgin Media being rebranded in order to cease paying Branson for use of the name. o2’s brand is probably stronger too IMO.

    • Avatar Matt

      I understad the case for Ofcom not wanting to lose a major network however O2, Virgin and Vodafone becoming one could still play out in future…. and while the UKloses a provider, I see it right now as Vodafone/O2 & EE/Three (based on mast/site sharing)

      As for branding, I wouldn’t be suprised if a whole new name came into it, or the name from Liberty Global coming forward….. maybe they’ll call it AA.

      Alot Allover

    • Avatar Dean

      If you look at what Liberty Global do with VM (they love to pay for a brand name it seems) they might ‘Licence’ the “O2 UK” mobile name considering O2 is a far stronger mobile operator brand than VMobile.

      OR could we see the merged and bigger VM rebranded to something else (‘Infinity Media’?) while Liberty Networks get into the Openreach/leasing game with a new identity?

      How mildly exciting!

  7. Avatar dave jones

    virgin media could use their routers to allow anyone with an o2 contract sim card and a compatible phone to use every router for voice over wifi. This would greatly improve network coverage.

    • Avatar Matt

      You mean Virgin Media Hotspots and WiFi Calling.

      I personally don’t think this is innovative idea but its valid, though realistically O2 already do WiFi Calling so not exactly anything new just access to Virgin Media Hotspot network.

    • Avatar trainman269

      Not really an innovation as its live already…

  8. Avatar Matthew

    This is interesting news indeed if this happened I think we might see Vodafone buy Cityfibre so like the other 2 main networks they would have a sizeable home broadband network in the medium term. So they could compete with BT and O2/Virgin Combo.

    • Avatar Roger_Gooner

      Vodafone cannot compete with the quad play operators having abandoned its plan to launch Pay TV in the UK three years ago (and had to spend millions to terminate the contracts with the channel providers at such an early stage).

  9. Avatar Roger

    This should be fun. Currently VM markets their EE based mobile sim as “Faster 4G on average than O2, Vodafone and Three”.

    • Avatar Matthew

      In fairness O2 have a lot of chance in upcoming spectrum auction to change that around and they have indicated the UK is now one of there keymarkets so expect they will be bidding well as they did to extend there spectrum in last auction.

    • Avatar Nick

      Virgin Mobile was rubbish and had to cancel. Despite having full 4G coverage. The data never worked at peak times and was known to Virgin for over a year. The community is full of these issues. They knew about the problem but still advertised that they are faster than O2,Vodafone and 3 and took on more customers despite not having enough bandwith. They did nothing to resolve the issue, people in the same room using EE had no problems with data, so i guess Virgin wont pay for extra capacity.

    • Avatar Stephen Wakeman

      Nik – this is par for the course for Virgin. They like to make claims about their data but do not cough up enough coin to make it happen.

      A couple of years ago I considered getting a Virgin Media SIM-only deal. The value proposition is outstanding and is only matched or beaten by Three. Knowing that Virgin uses EE as an MVNO I was interested in them as EE coverage and service in the areas I go is excellent. I admit that I’ve never tried Three, but have heard and continue to hear horror stories about their contention and capacity.

      But then I read customer reviews of Virgin Mobile and so many of them echoed exactly what you’re saying here re data issues when in the same room as someone on EE. Not only that but many were damning of their customer service too. Ultimately I didn’t make any move.

      I got the impression that you often get what you pay for. I wouldn’t say I like or trust any of the providers with the exception of Tesco Mobile who I always found excellent, good value and really efficient and friendly customer service.

    • Avatar Michael V

      @Stephen Wakeman
      In reference to the part about Three. I think it’s where you live in Britain depends on how their networks perform. I’m in South Wales & been with Three for many many years. Right now their coverage is great. I’m never without service. Even when traveling into West Wales.
      No they are not the fastest but my priority ain’t speed. it just works!

      However, during some visits to Birmingham city centre over about 2 years, I find there’s a lot of congestion & data usage can be painful!

      I do wonder how many of these people who tell us that coverage is poor, just need an upgrade to a phone directly from Three to ensure they have access to their low band VoLTE/4G voice network that has filed in the gaps between 4G data network & 3G!

  10. Avatar Barry Evans

    Interesting. So what would happen with SKY mobile using 02 network and potentially sky using virgin ISP?

    • Avatar Pezza

      Sky uses part of Virgins backbone anyway, but they ALL piggyback if part of each other’s fibre backbones anyway for internet traffic. Sky bought Easynet for a bargain back in the day and actually owns all its POP and backbone network in relative terms, it wasn’t money owed to a bank anyway. And it has invested in that network ever since, so in that regards it has no reason at all to use Virgins network.
      I would say it could use Virgins network to the door instead of waiting for FTTH in areas, but they are about as direct competitors as you can get so find that a difficult proposition to sell to the customer base…
      If Virgin did this no doubt they would see it as a move to squeeze their main competitor in the market.

    • Avatar Nick

      @pezza

      Sky sold off Easynet a very long time ago. Sky do not offer services to businesses except TV and thats mostly pubs etc

      Sky broadband and talk is for residential customers only.

      I think you’ll find that Sky are more dependent on Vodafone’s former Cable and Wireless network rather than Virgin.

    • Avatar Pezza

      @Nick, actually Sky only sold off the business broadband services if Easynet and Easynet itself, it kept the network and POP for itself.. it owns the lot. Likewise with UK Online that it closed as it bought them as part of the deal.

  11. Avatar 5G_Infinity

    Several thoughts here, while we are still under EU obligations if no longer a member, it has to be 4 operators and the CMA/Ofcom were clear on having 4. 3 MNOs would lessen competition, though current;ly the offer from our current 4 is not much different at the till, and network performance is purely luck depending on where you live.

    1. O2 needs a new fibre backbone for its DataCentres and fibre to all the towers (EE/VF/Three have fixed this issue)

    2. VM/O2 merger gives O2 fibre but does nothing for O2’s lack of spectrum, unless VM bids for 3.6-3.8GHz/700MHz spectrum at next auction

    3. Decision in 2020 to allow exercise in break clause on VM/VF contract (Mark, can you investigate if this couldn’t happen?)

    4. Liberty as a wholesaler makes eminent sense for all fibre, FTTP and Deep Fibre for mobile backhaul

  12. Avatar Litlephil

    So is virgin media looking to enter owning mobile masts aswell? Meaning o2 could disappear from uk and possibly Ireland although nothing said over there, streets meaning o2 sims will become virgin mobile or are liberty looking to sell virgin so virgin mobile comes o2? I can’t see a 50/50 as virgin was the one thing liberty did not want to lose when doing sale deals and they are investing. So I believe liberty may just go full out and take o2 from the uk meaning a massive boom in virgin mobile customers. And then virgin will have the monopoly of all 4… then all liberty needs do is decide what it’s plans are with ITV? For virgin Media uk to renter tv distribution would be a good thing as it was a mistake in my eyes when virgin sold all its tv assets channels and shares. Suppose we will all be watching to see the out come…?

  13. Avatar Onephat

    I’m wondering if Liberty are after the brand more than the mobile network itself. The Virgin brand has suffered a blacklash in public opinion over the last few months (yes I’m aware Branson doesn’t own Virgin media) but I’m wondering if a full O2 rebranding may help restore faith with the less technology/business educated members of the public.

    • Avatar BB

      Yes there’s a bit of PR backlash for Virgin at the moment (mainly down the widely documented travel industry woes). However Virgin has been around for 50 years and is a pretty iconic brand. I wouldn’t be surprised if they used both brands. In the Netherlands Liberty and Vodafone have kept both brands in their JV.

    • Avatar Roger_Gooner

      When Virgin Media came into existence in February 2007 by renaming of NTL Group the company had a 25-year agreement until 2032 with the Virgin Group to use the Virgin Media name. Liberty Global or Telefónica (or whoever owns the merged company) would have to have a good reason to seek an early termination of the agreement, and I don’t see one right now.

  14. Avatar Paul Barrett

    Why bother with obsessing about fixed line broadband.
    I use 3 routers now.
    No cables required.
    For many fixed line is no longer required.
    I get 80mbps for £17 pm as an existing 3 customer and the router cost nothing.
    Fixed line broadband is so last year!!

    • Avatar Onephat

      When Three can reliably match my 575mbs connection from Virgin I’ll listen up but we’ll probably be sitting well over 1gbs in my area by then. Yep it’s a few quid more than 17 but nevermind.

    • Avatar Matt

      I like your way of thinking but 80Mbps is lucky my friend.

      Also wouldn’t brag too soon, that can soon dissapear to a measly couple meg in seconds…. like if visit your area are run a speed test on my phone 🙂

  15. Avatar Steve

    Honestly, I hope these talks fail. It’d be great if they looked at starting their own network, and they’d be starting from a great position with their deal with Vodafone.

    They could follow the 2degrees network model. Start building their own masts and where they haven’t coverage, fall back onto Vodafone until they become sufficiently large.

  16. Avatar comnut

    No, Virgin do not ‘own’ O2 or viceversa.. they just rent space from them!
    https://www.moneysavingexpert.com/phones/piggybacking/

    “There are actually only four UK mobile networks – EE, Three, O2* and Vodafone* (check signal using Ofcom’s Mobile Coverage Checker). All the other providers ‘piggyback’ – ie, buy space from – one of these four networks. For example, Tesco and Giffgaff are on O2, Asda is on EE, Smarty uses Three and Voxi is on Vodafone.”

    Virgins mobile offering needs a bit of improvement, so it may be good!

    And as Virginmedia offer 300MBPS for only £50 a month, can anyone beat that??

    • Avatar comnut

      If a link has an * by it, that means it is an affiliated link and therefore it helps MoneySavingExpert stay free to use, as it is tracked to us. If you go through it, it can sometimes result in a payment or benefit to the site. It’s worth noting this means the third party used may be named on any credit agreements.

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