What Would a Vodafone Buyout Mean for Virgin Media?
The world of corporate mergers is one of near constant buzz. If it isn’t one company planning a merger, then it’s another, and whilst this endless hum of rumour can become hard to pay any attention to, especially with so many whispers coming to nothing, there are some you should pay heed to. We heard about one such deal in June 2015 when the Vodafone Group and Liberty Global announced that they were in talks to exchange “select assets”. At the time, a Vodafone executive said “There is no certainty that any transaction will be agreed, nor is there certainty with respect to which assets will ultimately be involved”. Ultimately, those talks came up against some major stumbling blocks, and talks were terminated as of September 2015.
To all those viewing, it seemed like the deal was dead in the water, but reports are now suggesting that the fires have been relit over Christmas, with Liberty Global chairman John Malone instigating new talks and sets of high ranking officials from both companies meeting with investors to gauge interest in what has been described as a “friendly merger”. All in, the deal could be worth around £140 billion, and would make one of the world’s largest combined telecommunications companies, with Liberty Global a leader in global broadband and Vodafone a company with over 450 million mobile customers.
It’s easy, therefore, to see why a merger of their two companies would be of particular interest, but there’s one particular asset that raises an interest for British customers – Virgin Media. Indeed, Liberty Global are the proud owners of the highly profitable pay TV giant, and that would be of keen interest to Vodafone, but why?
All one really need to do is look at the current state of the telecommunications industry in the United Kingdom. EE is being purchased by BT and Three are trying to buy out O2. Put simply, the market is shrinking, so convergence and customer base size are going to become increasingly important. Another important piece of the puzzle is Virgin Mobile, the mobile network that Virgin have operated since 1999. Over the years, that service has relied on the EE (formally OnetoOne and T-Mobile) network in order to connect customers, but with BT’s purchase of EE about to go through, that would mean that Vodafone would be paying EE to run their own network.
Should a deal between Liberty and Vodafone be struck, you can guarantee that Virgin Media would utilise Vodafone’s network, thus robbing EE of an important source of revenue. For Virgin Media customers that potentially means losing some signal quality whilst out and about, given Vodafone’s inferior mobile network. But don’t go running to the 0844 800 3118 contact number for Virgin Media just yet, because there are plenty of positives that could come from the deal.
Namely, lower costs for Virgin Media customers. Tighter integration between the two companies would yield huge profit savings and offer boosts to infrastructure in things like broadband and home phone would likely result in savings for customers.