Containment does not prevent business. The Spanish giant Telefonica admitted to being " in the negotiation phase ", with the European cable champion, Liberty Global with a view to " integrating their telecoms activities in the United Kingdom ". Engagement in full confinement, for a potential marriage at 28 billion pounds sterling (32 billion euros).
The two groups do not provide any additional information on the subject. They made their discussions public, confirming information from Bloomberg. Nevertheless, the dossier could progress very quickly. Further details could also be communicated when the Spanish group's results are presented on May 7. " The transaction could result in the creation of a joint venture between the two entities"Explains Tariq Ashraf, Telecom consultant at BearingPoint. This gives more financial flexibility by allowing this new company to go into debt itself, or by preparing an IPO. This would also respond to the concern of the Spanish group to disengage from its British operations. O2 (Telefonica) is the second UK mobile operator with just over 25% market share. In fixed lines, Virgin Media (Liberty Globale's subsidiary) is third, with 18% market share.
A divergent market
Indeed, the British telecoms market is relatively different from French. The British began to deploy fiber later, with an offer that has long been dominated by cable. Only Virgin Media is an important player in very high speed, thanks to its cable network. And it begins to deploy optical fiber, via a dedicated structure. Then, there are very few convergent offers, that is to say combining the mobile and the fixed. Only BT (ex British Telecom) has both a fixed network and a mobile network, after having bought EE from Orange and Deutsche Telekom. " As a historic operator, BT has no interest in launching convergent offers ," notes Tariq Ashraf. A merger between Virgin Media and O2 (the British subsidiary of Telefonica) would shake things up. The subscription amount for a converged offer is generally less than the sum of two subscriptions when they are not taken out together. In France, they are both tools for winning over and retaining customers.
In addition, Telefonica has been trying to disengage from O2 for several years. A first merger with Three UK had been envisaged, before being abandoned for lack of an agreement from the British telecoms regulator. This wants to keep a market with four players in the mobile. Telefonica then tried to list its British subsidiary on the stock market. “ This type of operation is not possible when the operator has to face an investment wall. This is the case of O2 which must both invest in new mobile frequencies and in its network for 5G ", summarizes Tariq Ashraf. A merger with Liberty Global could help O2, since the mobile operator would benefit from the latter's fiber infrastructure (backbone), which is essential for connecting mobile antennas and coping with the increase in mobile data traffic.
For Telefonica the exit door is therefore to turn to a cable operator. The tension went up a notch for the Spanish group in the United Kingdom, when Vodafone and Liberty had entered into discussions. They were unsuccessful. Now Vodafone is threatened in its own market. The British operator would be isolated and weakened by a merger between O2 and Virgin Media.
