Newly merged Virgin Media O2 ‘ready to fire’ at incumbent BT

The head of a newly combined Virgin Media O2 has pledged to take on BT in the battle for broadband-to-5G customers after completing the largest ever UK telecoms deal.

“We will go for them,” said Lutz Schüler, who was named chief executive of the combined cable and mobile company in April, referring to the UK incumbent and its mobile arm EE. “We are ready to fire. We are fighting fit.”

Virgin Media O2, which completed its £31bn merger on Tuesday, has 47m customers and combined revenue of £11bn. Schüler said the enlarged company expected to grow by attracting more customers that buy bundles of products combining broadband, mobile and television. “This is what the entire merger is all about,” he said.

The deal has also opened the door for a rethink of its network strategy and Virgin Media will, for the first time, try to wholesale its cable network to other companies as it expands into new areas. It also wants to rekindle a plan to bring in infrastructure investors to fund the construction.

Virgin Media O2 is already in talks with potential investors and trade partners over financing the project, which could add 7m to 8m homes to its fibre footprint.

The group has talked to Sky, now run by former Virgin Media executive Dana Strong, and Vodafone about a wholesale deal according to a person with direct knowledge of the situation. Vodafone, which said last week it was talking to BT and other parties about network investment, declined to comment. Sky declined to comment.

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“If you want to invest more money in networks then you want to have partners on it,” said Schüler. “There’s a lot of money looking for infrastructure investment,” he added.

Lutz Schüler: ‘If you want to invest more money in networks then you want to have partners on it’ © Bloomberg

The move comes at an unprecedented time for UK telecoms investment.

BT said last month that it was looking for a partner to help fund the rollout of fibre to an extra 5m homes as part of its strategy to upgrade 25m dwellings to the faster speed network by 2025. Dozens of smaller fibre players have also emerged to fill in parts of the country where BT, which historically has been averse to opening up its cable network to other companies, and Virgin Media, have yet to reach.

Virgin Media O2, which will be jointly owned by Liberty Global and Spain’s Telefónica, has committed to spend £10bn over the next five years on boosting its 5G and fibre network strength and expanding into more digital services such as ehealth and video gaming.

The deal is the latest example of consolidation within UK telecoms over the past few years, which kicked off with BT’s £12.5bn takeover of EE in 2015 and was followed by Comcast’s £30bn acquisition of Sky’s business covering the UK, Germany and Italy in 2018.

O2, the UK’s largest mobile network by number of customers, has effectively been on the block for almost a decade.

Telefónica first opened talks with BT, its former owner, about a sale but O2 was overlooked in favour of EE. It then agreed to merge the business with Three but the deal was blocked by competition regulators. O2 was later offered to private equity companies but at a valuation that was deemed too steep, before being lined up for a float that was disrupted by the Brexit vote.

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Project Pink — the deal to merge O2, which will help reduce Telefónica’s debt, with Virgin Media — was agreed last year following a push by Liberty Global to reshape its European cable empire.



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