Telefónica and Liberty plan to buy TalkTalk in the UK for $3.6 billion

Telefónica and Liberty, the 50% owners of Virgin Media O2, the joint UK subsidiary of the two, are considering buying telecommunications company TalkTalk, according to Sky News. However, the British television channel indicates that negotiations have just started and that the operation could not be completed.

In negotiations, TalkTalk would be valued at 3,600 million euros, debt included. If these materialize, Virgin Media O2 would become the second-largest broadband provider in UKovertaking Sky and ranking only behind British Telecom (BT).

TalkTalk provides pay television and internet access services to businesses and consumers in the UK. In recent years, she has specialized in direct service to companies. It is owned by fund Toscafund Asset Management LLP, which in 2020 took over the company for £2bn including debt. It currently has 4.2 million customers in the country, of which 2.4 million have fiber optic contracts.

For its part, Virgin Media O2 has 46.5 million video subscribers, broadband and mobile connectivity, an enterprise value of 38,000 million pounds (about 44,600 million euros) and annual revenues of 11 000 million pounds.

Three months ago it emerged that Sky was also considering acquiring TalkTalk, as well as Vodafone. Indeed, from the United Kingdom it is pointed out that these negotiations with Virgin Media O2 could force the company chaired by Nick Read to launch a counter-offer. However, this group is showing an increased interest in mobile telephony services, which is why it is considering buying the British operator Three.

After learning of this merger between Virgin Media O2 and TalkTalk, BT shares fell sharply on the stock market, losing 7.65% at the close. This decline is due to the fact that, if the takeover goes through, the group led by Philip Jansen would see its position as the main supplier of broadband Internet and television in the United Kingdom threatened.

It is true that the operation would be one more step in the so-called process of consolidation which the British market is facing, according to the leaders of the sector. This would reduce costs and make new investments to modernize the country’s infrastructure.

This was one of the main objectives of the merger between Telefónica and Liberty, which publicly committed to invest 10,000 million pounds, or some 11,600 million euros at the then exchange rate, until 2026. This figure includes investments for fixed networks but also for the deployment of 5G mobile networks.

Openreach, the infrastructure subsidiary of BT, also assured that it would accelerate the deployment of optical fiber in the country, disbursing 15,000 million pounds to reach 25 million homes in 2025. For its part, CityFibre, a A provider that took advantage of BT’s slowness to gain market share secured £4.9 billion in funding in June to roll out new fiber networks.

TalkTalk was founded by Sir Charles Dunstone in 2004 when it was part of Carphone Warehouse, which it later spun off. It was delisted 18 months ago when its acquisition by Toscafund was finalized. It gained market share by betting on the low-cost market and offering lower prices than the competition. Its TV services also include Sky and BT channels.

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