In response to the frenzied speculation over the future of UK mobile network operators EE and O2, Vodafone is exploring options for expansive growth, which may include a merger with Liberty Global, the owners of Virgin Media.
The latest reports were leaked over the weekend by sources close to Vodafone who declined to be named. They come in the wake of BT’s talks with EE and O2, and speculation that Hong Kong conglomerate Hutchison Whampoa, which owns Three, was preparing a disruptive bid for one or other of the UK’s two largest mobile networks.
No deals have yet taken place, nor has any firm confirmation emerged from any potential buyer that discussions are even progressing, save for BT.
Vodafone, which had so far been absent from any discussion over the matter, has now weighed in after BT’s actions put it under pressure to act.
A merger between the two would see the creation of Europe’s largest communications company with revenues approaching $130bn (£82.8bn), and in the UK, would hand Vodafone control of one of the largest consumer broadband and cable television companies in the market, as well as substantial fibre network assets that would boost the fibre it already owns having bought Cable & Wireless.
Communications consolidation: the story so far
24 November 2014: BT reveals talks with O2, says it is "assessing the merits" of buying an MNO.
26 November 2014: Not to be left out, EE reveals it has also been talking with BT.
28 November 2014: Hutchison Whampoa leak fuels the flames with talk that it could buy either EE or O2.
The mobile network operator (MNO) had already been exploring options around expanding the range of services it offers to the public, and in November 2014 committed to launching its first home broadband service next year, claiming it could pass up to 60% of UK homes with superfast fibre connections.
However, the unnamed whistle-blower revealed that Vodafone has concerns about how it would fund a deal, and the debt levels of the combined entity, stressing that no formal negotiations had taken place.
The two companies have previously been in open competition to acquire communications assets in Europe. Last year, Vodafone notably outbid Liberty Global to pick up German cable TV firm Kabel Deutschland. Liberty Global, meanwhile, also owns the combined assets of German operators Unity Media and KabelBW, which may give rise to regulatory concerns should a deal come to pass.
Liberty Global bought Virgin Media in February 2013 for £15bn and, at the same time, upped sticks and relocated its own corporate HQ from Delaware in the US to the UK.
Separately, it also emerged over the weekend that Vodafone wants to buy Tesco’s loss-making Blinkbox video streaming service, reportedly labelled a distraction by Tesco top brass following the discovery of a £250m black hole in the retailer’s accounts.