U.K. mobile operator O2 could be set to merge with Virgin Media to create one of the country’s largest mobile, broadband and TV companies.
Spanish firm Telefónica, which owns O2, on Monday confirmed it was in talks with Virgin owner Liberty Global about a potential merger of the two companies.
“In relation to the news published in some media regarding the discussions with Liberty Global on a potential integration of their respective telecommunications businesses in the United Kingdom, Telefónica informs that the process initiated by both parties is in a negotiation phase, not being able to guarantee, to this date, neither the precise terms nor the probability of its success,” the company said in a statement.
“In the event of a satisfactory agreement on this potential transaction, Telefónica will communicate such information to the markets.”
The talks are focused on creating a joint venture equally owned by the two companies, a source with knowledge of the matter told Reuters.
While the negotiations remain in the early stages with no guarantee of a deal being met, a merger between the two firms would increase pressure on telecoms giant BT, which owns the UK’s second-largest mobile network EE.
O2 is the UK’s largest mobile operator with 34 million customers, compared to BT’s 28 million, and a tie-up with Virgin Media would see the company adding the cable provider’s 5.3 million broadband, pay-TV and mobile customers to its already vast network.
Back in 2015, Telefónica tried to sell O2 to CK Hutchison, the owner of Three, for £10.3bn. However, that deal was blocked by the European Commission over concerns that it would have left just three major mobile phone operators in the UK.
The Spanish telecoms giant went on to consider a £10bn stock market listing for its British division, but abandoned the plans amid concerns about Brexit.
Liberty Global, through its European venture Liberty Media, has been gradually moving away from control of its operations. Vodafone last year bought Liberty’s German and Eastern European cable assets, and the two companies have established a joint-venture in the Netherlands.
Vodafone is also expected to replace EE as Virgin Mobile’s wholesale partner from next year as part of a five-year deal lasting until 2026.
It remains to be seen whether a deal between O2 and Virgin Media, which Bloomberg reports could be announced as early as next week, would scupper this planned arrangement.