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Virgin Media O2 UK Allegedly Offer £3bn for TalkTalk Broadband Merger

Friday, July 15th, 2022 (7:55 pm) - Score 7,992
TalkTalk Logo on Blue Wall

Multiple newspaper reports are this afternoon claiming that mobile and broadband giant Virgin Media (VMO2) is in early talks to merge with low-cost conscious UK ISP TalkTalk and take on its fixed line customer base of 4.2 million (VMO2 is home to 5.6 million). The proposed deal is said to value the company at around £3bn.

At present Virgin Media and O2 are still fairly fresh from their own mega merger last year, although despite their combined size the newly merged company is still somewhat behind arch-rival BT in terms of their fixed broadband base. BT is currently home to somewhere around 9 million customers, although it’s hard to be sure as they stopped reporting an exact total some years (after they started losing customers).

The decision to merge with TalkTalk, if agreed, would thus create a comparable customer base to BT’s and help to support VMO2’s plans to expand their Fibre-to-the-Premises (FTTP) network to a further 7 million UK premises by 2027 via a new joint venture (here). Indeed, VMO2 have been hunting for a co-investment partner in the ISP space to help conduct that project, with Sky Broadband and TalkTalk being logical choices.

As for TalkTalk, in 2020 they became the subject of a £1.1bn takeover by Toscafund – controlled by hedge fund tycoon Martin Hughes (here), which including debt valued the broadband provider at around £1.8bn. The deal took the ISP private and gave them more financial flexibility for their future plans. Since then, they’ve backed altnet builder Freedom Fibre (here) and acquired Ethernet provider Virtual1 (here). TalkTalk has also been linked to the possible acquisition of Ovo Energy‘s (SSE) broadband base of c. 100,000 customers (here).

However, one potential issue here is that VMO2 and TalkTalk tend to focus on different parts of the fixed broadband and phone market, with TT being more of a budget provider and Virgin trying to target the premium space. But it’s plausible that a merger deal may retain TT in its position and brand as a low-cost option, albeit while offering customers access to their newer FTTP network at wholesale (TT is currently dominated by Openreach products).

We should also mention that VMO2 is a significant player in the UK Pay TV market, while TT also has a Pay TV base of their own, although the latter has long since stopped trying to compete directly with the big players and have instead moved to focus on a cheaper solution via Netgem TV.

In addition, VMO2 gobbling up TalkTalk could potentially have a negative impact upon CityFibre. TalkTalk are one of CityFibre’s primary ISPs on their new FTTP network, and losing them to VMO2 would thus be a blow. Being able to attract major ISPs to a network is something that can help alternative operators to succeed. But CityFibre would still have Vodafone, Zen Internet and many more on their side.

At the time of writing, TT and VMO2 have declined to comment on the reports (examples here and here). Meanwhile, BT’s share price has understandably tumbled by more than 8% on today’s news.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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31 Responses
  1. BirminghamFail says:

    Well, there goes my cheap broadband..

    1. El Guapo says:

      maybe the mergers & acquisitions board will slap them down. It wouldn’t be the first time. I can’t see why they need to consume talktalk. It seems like they’re admitting defeat over real fibre (clarification: I don’t consider coaxial cable to be “fibre” no matter what anyone says)

    2. An Engineer says:

      VM don’t consider it real fibre either, El Guapo. Which is why they’ve committed to overbuilding the coax and making full fibre available to all of their customers by 2028.

  2. Jonny says:

    I’m interested in the implications this has on the leased line space – TTB are *huge* in that market

    1. JmJohnson says:

      That’s the first thing that popped into my head also. TalkTalk are not only a leased line provider but also a wholesaler to ISPs like Daisy.
      Surely this would be looked into due the monopoly created… the remaining large provider being BT.

  3. John Jive says:

    Please no

  4. Jason says:

    I wonder if the CMA will stop this deal going ahead

  5. Firefly says:

    It looks like it’s very bad week for BT group

    1. Alex says:

      This is much much worse for CityFibre.

  6. Jack says:

    Oh god no! I pity those already on TalkTalk but they are by far better than Virgin Media. Hopefully the competition watchdog slaps the deal down.

  7. Ex Telecom Engineer says:

    Where are VMO2 getting the reported £3 Billion from? And aren’t the majority of Talk Talk customers supplied via Openreach FTTC/FTTP? If it happened, wouldn’t VMO2 have to run Talk Talk customers via the existing network, and only rebrand? As it probably wouldn’t be feasible to migrate them onto VMO2’s network for years. There’s also a possibility some may decide to move, if they suffer customer service issues as a result of any takeover/reorganisation.
    I’m not saying this story is false, but I personally find it hard to believe that VMO2 would takeover Talk Talk. It’ll be interesting to find out if there’s anything behind this, other than another media release targetting BT’s share price. I believe the story was released through Sky News, and the Telegraph around the same time, aproximately 14:24 to 14:35, but BT’s share price started falling around 20 minutes earlier as far as I can tell. It appears some in the city were given the heads up, or knew the story was being released beforehand.

    1. Ribble says:

      About the same time the CWU stated there would be an announcement later in the day (industrial action)

    2. An Engineer says:

      Potentially anchor tenant for their planned network expansion.

      Fair few lucrative TTB circuits currently on Openreach tails that may be moved to their own metro as they build it, too.

      Prevent CityFibre getting a bunch of customers, take a bunch of custom from Openreach.

      No need to do much of anything with the business for a while. Encourage customers to full fibre as and when and install a VM ONU instead of an Openreach one.

  8. Duncan says:

    But TalkTalk use Openreach lines and Virgin use their own so how will that work. Not all TT customers can be converted over to Virgin cable as there are bound to be loads of streets that don’t have coverage from Virgin.

    1. Badem says:

      Its the other way around, acquiring TalkTalk give VMO2 access to TalkTalks Infrastructure which utilises Openreach and Cityfibre Networks, this in turn allows VMO2 to serve more customers where their network does not penetrate.

      In time those in VMO2 foot print would be migrated over to VMO2 from OR network.

  9. Rich Branston says:

    Two of the largest ISP IPv6-slackers. Maybe this’ll delay rollout ‘plans’ for another two years!

    1. Vecna says:

      IPv4 (dynamic or static) works just fine for the average user and once the big ISPs have ran out of ipv4 addresses then I’m sure they’ll roll out ipv6 when absolutely necessary. Lack of ipv4 addresses only affects the smaller ISPs. Bit of a non-issue, at least for now.

  10. Optimist says:

    Some years ago, Virgin Media offloaded its non-cable customers so transferred them to Talk Talk, now it wants them back again!

    Déjà vu all over again!

    1. Vecna says:

      Yep once upon a time VM used to sell Openreach based xDSL services.

  11. FibreBubble says:

    Could be a smart defensive move against customer losses to cityfibre.

    1. An Engineer says:

      They want to buy themselves an anchor tenant for their network expansion as well as keep that customer base from CityFibre.

      Smart.

    2. TBC says:

      I was thinking this would take abig chunk of customers away from Cityfibre.

      Maybe if they had invested in FTTP sooner and not been so stubborn that coax was the future. They wouldn’t need to start poaching.

    3. An Engineer says:

      I’m not sure what they’ve built so far has to do with buying up a customer base to improve the business case to build more FTTP in areas where they’ve no coverage.

      They weren’t stubborn at all about coax. The business case for replacing it wasn’t there until recently, and the costs of building full fibre are now close enough to the costs of the next generation of cable it’s become worthwhile.

      Across Europe the numbers are different and coax is mostly staying. In the USA the numbers are different and coax is mostly staying.

      It would poetically be news to someone like YouSee in Denmark that their 1G down, 500M up service over coax is unacceptable and they’re being stubborn using it.

      Remind me what the top Openreach FTTP service is again?

  12. Mark says:

    Oh god, no thanks! I’d rather not have broadband than join Vermin!

    1. Ell says:

      Sadly some towns only have choice of Virgin with speeds of up to 1Gbps or Openreach with speeds up to 76Mbps as Openreach and the Altnets have yet to be in a position to make available full fibre speeds to compete with Virgin in those towns.

      My street for example has VM infrastructure which is fast, faiurky reliable and underground, the Openreach infrastructure is less acceptable, prone to service blackouts and still uses telegraph phones which are outdated infrastructure.

      I just hope that by June 2023, the Altnets and Openreach have got round to providing a FTTP service as a alterative to VM.

    2. Alex says:

      Not sure why telegraph poles should be considered outdated. They’re a perfectly legitimate and contemporary way of providing network where underground isn’t viable.

    3. MRLeeds says:

      Fully agree, I opted for ~48mbps VDSL over Virgins M500/Gig1 having been burnt by them elsewhere in the past. I made a wise choice, my neighbours were constantly moaning about speed loss and outages, I’d rather have reliability that unsustainable/unusable speed. Luckily for me late last year CityFibre did my street (even though the original build plans stopped a few streets before and I was due in a few more years). I now have 900/900 via Vodafone for a great price.

  13. Kevin says:

    Talk about out of the frying pan into the fire! Virgin Media o2 is the worst company anyone could ever deal with. also the Openreach network is a lot better than Virgin’s network that was built very cheaply back in the 90s and crumbling apart in most places… very far from ‘reliable’ and the customer service is a complete farce it actually got to the point at one stage if I needed something done I contacted the complaints team as the normal customer service is staffed with morons.

    1. An Engineer says:

      Most of the active components in the VM cable networks have been replaced since original build. Very few, if any, powered components left from then only cable and taps.

      The networks built on the cheap: Eurobell, Videotron and others, saw extensive upgrade, mostly in the late 2000s to enable higher upload speeds.

      VM are overbuilding the coax with full fibre. It’d be that new platform TT customers would be going onto. A platform superior to the current Openreach FTTP platform.

      The idea that Openreach’s network is more reliable than VM’s as a blanket statement is hilarious. Twisted pair can’t compete with coax for performance or reliability.

      Most of the reliability issues are largely outside of VM’s control. It’d cost more to fix all the possible causes of problems within customers’ homes than to just build full fibre. 10+ million truck rolls to rearrange customers’ internal wiring is impossible. Most of the reliability issues source from within customer homes but you knew that, right?

      As VM build out their full fibre that should be of similar reliability to Openreach full fibre.

      I’m glad you go straight to the complaints team given you probably aren’t polite to the ‘morons’ in CS if that’s your opinion of them.

      They may not be able to deal with a particular issue but that doesn’t make them morons. It makes them potentially short of the skills and/or tools to solve that issue.

      Hope you feel better for the rant though.

    2. FibreBubble says:

      One has to wonder why time after time, year after year, Virgin performs so badly on ofcom complaints data. TalkTalk could fit right in.

      https://www.ofcom.org.uk/phones-telecoms-and-internet/advice-for-consumers/telecoms-and-pay-tv-complaints

  14. Jimmy says:

    Does anyone have any further information on the very widespread outage on Virgin’s broadband network last night?

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