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Telefónica, Liberty Global in talks to combine UK ops – report

Liberty Global and Telefónica are in talks to combine their UK operations, culminating in an agreement that would effectively pair Virgin Media with Telefónica's O2 mobile business, Bloomberg reported Friday citing unnamed sources familiar with the matter.

Though the timing of a deal could be delayed or fall apart altogether, an agreement could be announced as early as next week, Bloomberg added.

Telefónica, which reports Q1 earnings on May 7, declined comment to Bloomberg. Liberty Global has been asked to comment on the report.

But a deal would play into a bigger network convergence trend that is seeing service providers deliver their offerings over a blend of fixed and mobile networks. In this instance, a combo would combine the operations of O2's wireless/mobile business, which has about 34.5 million customers, with Virgin Media, the UK's largest cable operator, and effectively create a much bigger telecom player in the UK market.

The report of discussions between Liberty Global and Telefónica arrives about six months after Virgin Media announced it was moving away from its MVNO relationship with BT-owned EE in favor of a new one with Vodafone when its current deal with BT/EE expires late next year.

While the Virgin Media-Vodafone deal reportedly gave the cable operator more attractive costs than it was getting with BT, Liberty Global's purported interest in combining operations with Telefónica/O2 indicates that the cable op is looking to reduce its costs even further while also establishing an even tighter business integration with a mobile network operator.

The New York Times confirmed that talks between Telefónica and Liberty Global were underway, noting that Telefónica has been exploring options after a previous deal to merge O2 with Three UK was blocked by European antitrust regulators.

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— Jeff Baumgartner, Senior Editor, Light Reading

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