Vodafone could gatecrash the merger between O2 and Virgin Media or gain a foothold in broadband in the UK
Vodafone will be the biggest loser to the planned merger between O2 and Virgin Media and could try to ‘gatecrash’ the deal, industry experts say.
The British telecom giant has long been seen as a potential candidate for broadband provider Virgin, after previously unsuccessful takeover talks with parent Liberty Global.
But now Virgin is instead aiming to connect to the British mobile network O2, which is owned by Spanish Telefonica, leaving Vodafone out in the cold.
Vodafone has long been seen as a potential candidate for broadband provider Virgin after previously unsuccessful takeover talks with older Liberty Global
The deal would create a £ 24 billion telecommunications powerhouse comprising 6 million broadband customers and 34 million mobile users, challenging the dominance of BT and its mobile network EE.
But it would also not gain Vodafone a significant foothold in broadband in the UK at a time when the industry is shifting to offering ‘converged’ bundles that combine broadband, mobile and television services.
That could prompt Vodafone to make a competitive bid for Virgin or look for another acquisition target to expand its reach, analysts have predicted.
Vodafone, which has 444 million customers worldwide, is a major player in mobile and fixed assets in other top markets, including Germany, Spain and Italy.
Kester Mann, telecom analyst at CCS Insight, said: “When the Virgin-O2 merger comes about, Vodafone will be the biggest loser.
“It has tried to enter the converged bundle market but has not made much progress, so the creation of a new converged, more capable competitor will increase the pressure even further.
Vodafone has been talking to Liberty Global for years, so the O2 announcement could now bring it back to the table and make a rival offer.
“It has shown a renewed drive and commitment to the UK in recent years, but they could now remain quite exposed.
So if I were Vodafone and I heard about these merger talks, I would ask, ‘What are our options here? ‘
‘It is extremely difficult to win regular organic customers. This is only possible through an acquisition or a new partnership. ‘
James Craven, director of investment bank GCA Altium, added, “This may trigger a bidding war between O2 and Vodafone to close a deal with Virgin Media.”
HSBC analysts have also suggested that Vodafone’s bosses debate “whether the party should crash.”
And if the merger between O2 and Virgin Media continues, they said that broadband provider Talktalk and its 4.3 million customers could become an acquisition target for Vodafone or smaller mobile competitor Three.
Talktalk, which is 29.8 percent owned by Carphone Warehouse magnate Sir Charles Dunstone, has a market capitalization of approximately £ 950 million. The stock has fallen 30 percent so far this year.
But the analysts at HSBC said to customers, “If convergence starts to play a bigger role in the UK telecom market, we think Talktalk’s base and the scale it offers will eventually become a potentially attractive target for one of the two remaining mobile network operators without fixed broadband customers. ‘
The trend towards ‘converged’ packages on the telecom market has been predicted for several years, but in the UK companies are slower to adopt them.
In November, BT launched its Halo packages – for fixed broadband, fixed telephone lines and mobile – with promising ‘connectivity inside and outside the home’ and support from technical experts for families.
It costs £ 57.99 a month, compared to standard broadband costs £ 27.99 a month.
Vodafone declined to comment last night.