Virgin Media eyes becoming fourth UK MNO

Virgin Media reportedly has its sights set on becoming the UK’s fourth mobile network operator, saying it is ready to acquire assets Three and 02 may be forced to divest to win European Commission approval. However, such a move could jeopardise a potential merger between its parent, cable giant Liberty Global, and Vodafone.

Virgin Media reportedly has its sights set on becoming the UK’s fourth mobile network operator, saying it is ready to acquire assets Three and 02 may be forced to divest to win European Commission approval.

The Liberty Global (NASDAQ:LBTYA) subsidiary told competition commissioners reviewing CK Hutchison’s (SEHK:0013) proposed £10.25bn (US$15bn) takeover of O2 from Telefónica (MAD:TEF) as much last week, The Telegraph cited sources saying.

Virgin Media joins Xavier Niel-owned French challenger Iliad and alternative fixed-line provider TalkTalk in being interested in entering the MNO market through the potential remedies package.

Liberty Global was not immediately available for comment on the matter.

The Hong Kong-based conglomerate would prefer to sell only guaranteed capacity on the enlarged network to the likes of Tesco, which operates an MVNO, and Sky.

However, if regulators decide there must be four MNOs, Hutchison had reportedly indicated that it may sell O2’s towers and a small amount of its spectrum. The conglomerate has, nonetheless, expressed doubt that any new potential new MNO, such as Iliad, would be willing and able to acquire the additional spectrum needed to be able to compete effectively.

Such a move by Virgin Media could jeopardize a potential merger between its parent, Liberty, and Vodafone.

Liberty and Vodafone ended nearly four-month negotiations on a potential asset swap last September but, this February agreed to create a joint venture in the Netherlands. Vodafone CEO Vittorio Colao said at the time that the transaction “was not a blueprint for deals in other markets”, but noted that further fixed/mobile deals would be evaluated on a market-by-market basis.

Virgin Media operates as an MVNO using the EE network. The company claimed to have 3 million mobile services customers as of 23 December 2015, 2.3 million of which were postpaid customers.

Mobile is an important part of the company’s business model, with Virgin Media saying in a recent earnings report that “we continue to focus on increasing our proportion of higher-value postpaid customers, improving access to content via our mobile platform, expanding our range of higher value mobile handsets and cross-selling into homes already connected to our cable network”.

Hutchison won approval to carry out similar mergers in Austria and Ireland, in 2012 and 2014 respectively, after agreeing to concessions aimed at strengthening existing MVNOs.