O2 and Virgin Media merger could "trigger a ripple effect" in UK market

The merger under discussion between O2 and Virgin media has been confirmed today, and the move could bring about seismic changes in the UK telecoms industry. 

The fact that the two telecoms giants were discussing a merger was revealed earlier this week. It’s now been confirmed, pending approval, and the transaction is expected to complete in mid-2021.

The two companies together have announced plans to invest £10bn in the UK over the next five years, and industry experts at CCS Insight expect the deal to “transform the UK telecoms landscape”.

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“This blockbuster merger will transform the UK telecoms landscape and create a powerful new converged provider to rival BT,” said Kester Mann, consumer and connectivity director at CCS Insight.

“The UK has remained ripe for further consolidation since BT’s acquisition of EE in 2016, although the timing of the announcement – during a global pandemic – was unexpected. A combination of O2 and Virgin Media is a natural fit. Each side gains crucial assets it severely lacks: a mobile network for Virgin and a fixed-line arm for O2.

“In the long run, we believe it would be better for the JV to retain the O2 brand at the expense of Virgin Media. Both have a strong presence, but O2’s respected customer service, highly loyal customers and sponsorship of the O2 arena mean it is impossible to drop. A multi-brand approach serves only to duplicate costs and risks confusing customers.”

As far as the deal’s effect on the wider UK telecoms market, Mann argues there are some clear losers. Also, this deal could lead to other unlikely coalitions further down the line.

“Vodafone UK appears the biggest loser as the deal lays bare its weak position in the market for converged services. It also looks certain to scupper its virtual network partnership struck with Virgin Media in 2019.

“We think this deal will trigger a ripple effect on the UK market: Three, Sky and TalkTalk will all be assessing their positions and further deal-making can’t be ruled out.”

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We hope that the newly confirmed merger will benefit UK consumers via a series of cut-price deals. By combining their forces, the companies will be better able to make use of economies of scale and hopefully they’ll offer out some bargains as a result.

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