Virgin Media UK Sniffs Deal for TalkTalk’s Consumer Broadband ISP
Ding, ding.. round two. News reports claim that Virgin Media (VMO2) has allegedly revived its interest in a takeover of budget broadband ISP TalkTalk. But this time they’re reportedly focusing much more specifically upon the internet provider’s consumer division.
The long-established internet and phone provider – home to almost 4 million UK broadband customers (2.4m on FTTC/P) – is currently still trying to deal with the pressure from its existing debt pile, which involves selling off parts of their business (here and here). As part of that, the provider is already demerging the group into three separate businesses (TalkTalk Consumer, Business Direct and the Wholesale Platform) and cutting costs where it can.
The Business Direct division has already been sold to the company’s own shareholders for £95m (here), although they will probably continue the hunt for a third party to gobble that division (i.e. any proceeds in excess of the agreed £95m would be passed back to the company). Meanwhile, the efforts continue to carve off their consumer and wholesale divisions, with hopes being pinned on raising cash through selling stakes in those businesses or even disposing of them altogether.
According to The Telegraph (paywall), Virgin Media (VMO2) has now re-entered early talks with TalkTalk about the possible acquisition of its consumer division. Regular readers may recall that Virgin Media was previously linked with a potential £3bn deal to acquire the whole group in 2022 (here), but the operator allegedly got cold feet over market (i.e. debt markets were not as accessible) and regulatory (competition) concerns. Not to mention that many have questioned whether TalkTalk is even worth £3bn, but a smaller deal for just their consumer division might be more palatable.
The newspaper claims that TalkTalk is separately in talks with infrastructure fund DigitalBridge, which also backs full fibre alternative network provider Netomnia (YouFibre), about potentially selling a stake in its wholesale operations. TalkTalk allegedly still plans to then spin the consumer division out of the group following refinancing.
At this stage there are still a lot of unknowns about how VMO2 might approach such a deal, particularly given the new nexfibre wholesale division and the fact that TalkTalk tend to be much more of a lower cost brand than Virgin Media. Equally, such talks, assuming they do exist, might end up amounting to nothing – again – and there will no doubt be other interested parties (e.g. Vodafone and investment groups).
Finally, any deal would also represent bad news for Openreach (BT), Freedom Fibre and CityFibre, since TalkTalk is a major player on those three networks (they also work with some other AltNets, albeit to a smaller scale). But Virgin Media would no doubt seek, over time, to migrate TalkTalk’s customer base on to their new XGS-PON powered full fibre (FTTP) network. Suffice to say, competition concerns may still be a difficult factor to navigate around.
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 X (Twitter), Mastodon, Facebook and Linkedin.
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small typeo Mark?
At this stage there are still a lot of unknowns about how VMO2 “night” approach such a deal.
They want it done under a veil of darkness so that OFCOM don’t go poking around where they’re not wanted perhaps? 😉
This is bad news for competition!
Well competition is becoming harder even in current setting, the market is somewhat controlled by Openreach when it comes to most areas.
TalkTalk obviously struggling to stay competitive, smaller companys are selling customer bases as they obviously not seeing a profit required or wanted.
TalkTalks offerings currently are a bit c**p too, I learnt recently that they are only offer 100/20 or 940/100 on Openreach networks, theres no middle ground and the entry level service just isn’t quite competitive in my eyes.
Virgin Media (least favourable of ISP’s for me) will be able to take a lot of customers straight over to its own network and offer a bandwidth boost, others maybe sold to another ISP unless Virgin/LibertyGlobal are looking to go into the extended network via LLU business, that wouldn’t be wise for them I don’t think
I have been saying for around 5 years now that changes to the market/industry where incoming and in motion and I’ve been watching it change likewise, theres still a bunch more unpopular changes to go if it does go the way I expect.
@JP, TT offer 80/20, 160/30, 550,75 & 1000/115 via OR
@Leaf – When I looked recently they only offered 100/940 but I have checked again and you are correct, however, the connection at the property I’m renting at the moment has Openreach FTTP with TT and it maxes at 100/20 for some reason. (maybe capacity issues)
That’s if you believe there is any actual real competition, when most people only have one choice for a 100MBps+ provider in their area anyway. I don’t believe there truly is any competition any longer. I mean, lets face it, if there really was we wouldn’t have to agree to a 100% increase when a contract ends, would we?
Raises interesting questions about how a VM would deal with TT’s infrastructure providers (Openreach and CityFibre) especially if they were in an area covered by VM / Next Fibre.
@Mark, They also provide via Community Fibre too
They do not – fact!
@Gary, Tristia Harrison, TalkTalk CEO said they did :/
https://youtu.be/Ptdubt6oDy4?si=KA0-8SwAAs8kotKJ&t=290
Gary… They most definitely do provide services via Community Fibre as I have service myself. You could also try Googling “TalkTalk Community Fibre” and you’ll see it as well. Your “Fact” is actually not a fact at all
Yes, I’m aware, but I covered that with this text – “they also work with some other AltNets, albeit to a smaller scale,” mainly because CF wouldn’t be dramatically impacted by Virgin’s acquisition as the TalkTalk agreement is fairly recent (small base linked to TT).
Impact on their current footprint would be small, but surely CityFibre are hoping to grow their TalkTalk footprint – you can seen this being arrested going forward. This kind of thing can’t be good for the CityFibre take-up.
OMG!! As a very satisfied Talktalk customer why has been running on GFAST for some years and previously a VERY unsatisfied VM customer I’d be running for the hills if this merger / buyout / whatever ever went through.
Lmao, it is not that bad I have been with virgin for 8 years and 1 month now. Im not exactly sure why you had a very bad experience with virgin (to each there own).
Good gracious – don’t tell anyone you like g.fast – they’ll eat you alive!
Great, I left Virgin Media two weeks ago and joined TalkTalk to get away from them.
If this takeover comes about, there is always lower cost Now Broadband, who have just started (FTTP) contracts, providing SKY doesn’t take them in-house first of course. Many changes coming i believe, and most likely none good for the average customer.
I was going to go for now broadband, but seeing what is happening, I think I made the right choice to go where I am.
Sky own Now. Comcast own Sky. Comcast are the largest cable company in the world. I think they’re safe from takeover. 🙂
I don’t what is worse, Talk Talk or VM.
Never had anything to do with VM, to be honest, but I have heard a lot about them, Talk Talk, while not a customer, I have had to deal with them a lot of times over the years for different people.
There is one problem with this, lack of competition again, taking another player from the market
There are tons of altnets that’ve increased competition substantially. TalkTalk are selling nothing that can’t be purchased elsewhere and have a ton of customers still on ADSL. The impact to competition in the UK is highly debatable.
It will be interesting. My neighbours either side are on TalkTalk, and our road hasn’t got VM although it’s around us, Openreach FTTP although it’s around us, and CityFibre is there but isn’t switched on yet.
If this goes through, does it give VM the incentive to bring their service via Nexfibre to addresses currently relying on Openreach? Surely they won’t ideally want that in the long run!
‘If this goes through, does it give VM the incentive to bring their service via Nexfibre to addresses currently relying on Openreach?’
For sure. They are doing that anyway and having all those extra potential customers isn’t going to hurt.
Well I agree to a point, but there must be areas residents are on TalkTalk that could be to costly to bring VM to?
I can’t see them via Nexfibre doing our street when Virgin refused to after our area was around 80% covered back in 2020. Their rollout map also backs that up when it was published late last year.
Nexfibre’s budget is crazy high. Unless your street is private or has something else strange about it it’s pretty likely they’ll build there.
VMO2’s expansion budget was, give or take, £700 per premises passed. Nexfibre’s is £900. It makes a difference. They’ve listed the build in 2024 but are going until 2026 in their first phase so loads more to announce.
Unless TalkTalk are giving the business away, why would VMO2 buy it? VMO2 would have to migrate the customers onto their own platforms otherwise their margin’s would be miniscule. Openreach and CityFibre would want paying under their wholesale agreement’s and TalkTalk’s Wholesale business would also want paying for managing the service on their platform. Then there’s the risk that customers could just decide to change providers at the end of their contracts, leaving VMO2 very little upside down the road.
Even if the CMA were to eventually authorise it, it’d probably take months of investigation and consultations to get the green light.
If I remember correctly, the last time the Telegraph printed rumours involving VM and TalkTalk, it knocked 7% off BT’s share price. Maybe the reason this is being released now is because Mr Market wants to push BT under £1.
They’d absolutely move as many customers as possible to their own network and that’s the whole point of the exercise. Getting those cables into customers’ homes is a really big deal: once they’re there that’s a big hurdle, the inconvenience of the install, cleared. Once that’s done selling punters something else is easier.
Liberty have no interest at all in paying Openreach or CityFibre for use of their networks. Liberty pulled the VM expansion using Openreach GEA and instead had VM expand their own network. I doubt that’s changed given the Nexfibre JV.
I doubt the information is a poke at BT’s share price. More likely TalkTalk’s pricing is getting lower and lower as they’re nearing a cash crunch in a few months and Liberty/Telefonica are circling. I’m surprised BT aren’t an acquisition target themselves given their pricing: taking account of inflation their stock has never been lower.
If there is anything behind this story, personally I doubt it, it would take years to migrate TalkTalk customers onto VMO2; Things like VMO2 network availability, customer agreement and many other variables would make the process expensive and logistically difficult, in my opinion. There are probably contractual lock-in’s with various parties, not that that’d be a problem because migrating the TalkTalk customers would be a long and laborious process, which’d likely take years, and in the meantime many customers could just decide to change providers.
BT opened at the bottom of the Stoxx 600 this morning, with a low of 101.7p; It’s looking better now and recovered to around Friday close, but it’ll be interesting to watch as more media outlets regurgitate the Telegraph story.
litterally going to be just VM/OR servicing areas across the UK, only a matter of time.
With the rate things are going, I can see Brsk and cityfibre being owned by Vodafone, so it’ll end up being Openreach, Vodafone, Virgin.
@ex-techie
Except that Vodafone are sitting on a mountain high pile of debt themselves. The whole sector is struggling with sky high debt piles and the shareholders are probably getting twitchy about adding to it.
If they take it over they do not have to migrate them nor integrate them. Longer term they might do that but initially is can continue to operate as is as a separate wholly owned VM company
which lets face it, is EXACTLY what Virgin and BT want.
‘litterally going to be just VM/OR servicing areas across the UK, only a matter of time.’
Much like it was before the back end of last decade you mean, except much of the nation was only OR?
‘With the rate things are going, I can see Brsk and cityfibre being owned by Vodafone, so it’ll end up being Openreach, Vodafone, Virgin.’
Vodafone have had ample opportunity to invest in a network in the UK and haven’t. They could’ve joined the Nexfibre Joint Venture, could’ve jumped on board with CityFibre, could’ve co-invested in the Openreach build. I don’t think they could afford CityFibre now even if they wanted them.
‘which lets face it, is EXACTLY what Virgin and BT want.’
Of course! Why wouldn’t they?
This year could be the year that consolidation in the market takes place. It is though different to what happened with Cable as with cable each operator had its own excluding region with Fibre it is a free for all with lots of overbuild and lots of debt. Lots of the small altnet’s try to get market share by offering very low prices which are probably not very economic
The real value of Alt nets to the larger companies is the Customer base. In many cases their network is of no real interest mor their offices and certainly not the debt
In many cases it may be better to let the alt net go under and then just buy up the bits you want and without the debt
Oh no, we’re doomed! They’ll bring everyone over to crappy HFC! Even those on a CityFibre connection probably. I should have gone with TalkTalk when I had the chance, but noooo… I’m stuck w/ Virgin HFC until July 2025 at least
doubt it. VM has no meaningful way to deliver wholesale HFC services, so they’d have to either keep things as they are or move you onto a VM service at TT prices
I’d be more skeptical of such drastic change (including the suggestion that they’d aggressively move people onto Nexfibre). If they started demanding driveways to be dug up then I think a number of customers would look at their options.
VM absolutely can deliver wholesale over HFC: they made ready a while ago. Why they would in this case though is beyond me. Would cost to integrate TT with their wholesale system.
they certainly *could*, but is there any actual documentation that they *do*? the VMB wholesale website seems to focus on fibre, and specifically variants of leased lines including a network map that shows places that are nowhere near the cable network eg most of Cornwall.
is there an equivalent of a SIN for it? what CPE do they use given that their flagship devices are VM branded?
Virgin have been expanding their network but despite this their fixed subscriber numbers are pretty static. So capturing and porting TalkTalk customers from Openreach and CityFibre networks is attractive to them.
The difficulty will be for Virgin to retain TalkTalk’s parsimonious customer base with Virgin style pricing.
I’m with Talk Talk for about 6 years now and no other provider gives a price like I’ve got with B.B.and TV deals. Would it be better to move now to another provider or stick with T.T. I’ve got another 12 months left on my contract. Would appreciate your comments.
If the rumour is true or not, would be best to stay with TalkTalk as you have only 12 Months left on your contract, would take a while for any merger to become final. Your remaining contract with TalkTalk should be honoured by any prospective buyer in any case. The big decision will be, should you stay with TalkTalk at the end of your existing contract? There is a reasonable possibility their customer base will be offloaded at some stage anyway. Just my opinion, but your decision!
According to Sky, “A source close to the company denied a weekend report that it was in active discussions to sell the consumer division to Virgin Media O2”
https://news.sky.com/story/macquarie-close-to-dialling-up-1-2bn-talktalk-wholesale-deal-13070011
Story denied by talk talk, but vm have a history of making up rubbish, also,
Some parts of that story where on here this time last year, ive had both sevices in the past and both have a list of problems which i don t wnt back.
I’ve got a distinct feeling someone from VM or CF are feeding the Telegraph porkies.
Telegraph reports VM interested in CF
Telegraph repors VM interested in CFs main ISP talktalk.
Someone from inside and high up is feeding this nonsense to Telegraph.