VMO2 reportedly offers £3 billion for TalkTalk

Virgin Media O2 is eyeing up inorganic growth in the UK, having reportedly tabled a £3 billion bid for TalkTalk.

Mary Lennighan

July 18, 2022

3 Min Read
VMO2 gigabit van

Virgin Media O2 is eyeing up inorganic growth in the UK, having reportedly tabled a £3 billion bid for TalkTalk.

The recently-merged UK telco tabled an indicative offer “in recent weeks” and talks between the relevant parties are at an early stage and are being held on a non-exclusive basis, Sky News claimed late last week, citing unnamed sources.

The fact that talks are non-exclusive is key here. Virgin Media O2 is one of a number of telcos believed to be interested in picking up TalkTalk. Earlier this year both Vodafone and Sky were named as possible buyers, again at a price of around £3 billion, and again with the report coming from Sky News. That price, which includes debt, appears to have been set by company founder Charles Dunstone. It’s worth noting that the £1.1 billion takeover deal at the end of 2020 that saw the telco delisted from the stock exchange valued it at close to £2 billion, including debt.

The increase in valuation perhaps reflects the fact that TalkTalk is a natural acquisition target at this stage in proceedings, and is a desirable addition to various operators’ portfolios, hence the broad interest. TalkTalk says it serves 4.2 million customers with fixed broadband, mobile and TV services, via 3,000 unbundled exchanges. It’s fibre customer base comes in at 2.4 million.

And that’s where the attraction lies for Virgin Media O2 and others.

“The primary motivation to buy TalkTalk would be to build scale,” says Kester Mann, Director, Consumer and Connectivity, at CCS Insight. “As Virgin Media O2 embarks on an expensive upgrade of its entire cable network to full fibre, the more customers it can connect, the more cost-effective this process will be.”

Further, a TalkTalk takeover would give Virgin Media O2 a leg up in its quest to take on BT. It’s potentially a double blow for the UK incumbent; aside from facing increased competition from an enlarged rival, it could also lose a major wholesale customer in TalkTalk – a “strategically important” one, as Mann points out.

“Buying a value-for-money provider would help Virgin Media O2 expand its presence into the entry part of the market,” Mann adds. “This could be particularly relevant given the likelihood of a sustained period of economic uncertainty. It would also help improve its underwhelming position in the business market, an area highlighted as a major growth opportunity by [Virgin Media O2 chief executive] Mr Schuler.

But with big names like Vodafone and Sky also sniffing around – their interest in TalkTalk is similarly motivated – Virgin Media O2 will face some competition to snap up the value player. As such, maybe that £3 billion price tag is justified.

Whatever the outcome, the UK market looks set to remain a hot spot for industry watchers in the coming months.

“With the UK ripe for further consolidation amid much speculation of a potential merger between Three and Vodafone, the next big deal is only a matter of time,” Mann predicts.

Indeed. Whether or not the next deal will include TalkTalk is anyone’s guess. But it seems relatively safe to bet that the telco will play its part in the reshaping of the UK market at some point.


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About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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