Virgin Media O2 reportedly entered into discussions to buy TalkTalk, making an opening £3 billion offer as the race to acquire the UK fixed player hots up following interest from other industry players.
Sky News broke news of the talks by Virgin Media O2, citing sources which stated negotiations between the pair are at an early stage and are being held on a non-exclusive basis.
Virgin Media O2 is jointly owned by Telefonica and Liberty Global, so the move would help it bulk up its operations and build scale.
TalkTalk’s website states it has 4.2 million customers, including 2.4 million fibre connections across the UK.
It also offers pay-TV services.
However, Virgin Media O2 is likely to face competition for the tie-up, with its opening bid coming three months after Financial Times reported TalkTalk had been approached by a number of companies over a potential deal.
One of the potential suitors is Vodafone Group, which has long been linked a deal, while Sky News parent Sky, which has a presence in mobile and fixed, was also reported to be assessing the deal.
No offer materialised at the time, but Virgin Media O2’s bid could force a counter from other parties.
Kester Mann, director of consumer and connectivity at CCS Insight, believes a deal between Virgin Media and TalkTalk would be a major statement of intent by the former’s CEO Lutz Schuler, particularly with his ambitions to take on BT.
“The deal would not only create a bigger rival, but threatens an important source of income for Openreach, for which TalkTalk is a strategically important customer.”
Mann also believes the UK is ripe for further consolidation, citing “much speculation of a potential merger between 3 UK and Vodafone”, and “the next big deal is only a matter of time”.