O2 and Virgin Media to merge creating new UK telecoms giant

Two of the UK's biggest telecoms companies, O2 and Virgin Media , are merging to create a new telecoms giant, they confirmed on Thursday.

The £31 billion ($38B) deal will see mobile operator O2, which is owned by Telefonica, and broadband operator Virgin Media, which is owned by Liberty Global become one company to create a rival to Sky and BT . The newly formed telecoms giant will be able to offer customers packages including entertainment, broadband and mobile. Subject to regulatory approvals, the transaction is expected to close around the middle of next year.

"Combining O2's number one mobile business with Virgin Media's superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical," said Telefonica CEO Jose Maria Alvarez-Pallete in a statement.

Mike Fries, CEO of Liberty Global, added that the two companies were fully supportive of the UK government's digital and connectivity goals.

The merger will combine O2's 5G network with Virgin Media's Gigabit broadband service, bringing together a combined customer base of over 40 million people. O2, which was originally BT's own Cellnet mobile provider before it was spun off in 2002 and is now one of the UK's biggest mobile operators. BT acquired EE in 2016 to bring a mobile operator back under its roof, forming a telecoms giant, which Virgin Media and O2 will seek to rival.

"This merger between the UK's biggest mobile company and a prevailing broadband giant will create a titan of the telecoms industry that will almost certainly throw down a challenge to the most dominant player, BT," said Ernest Doku, mobile expert at price comparison site Uswitch. "It's a natural and complementary fit, with O2 returning to fixed-line broadband and Virgin Media bolstering its mobile proposition."