Telefonica SA said Monday that it is in negotiations with Liberty Global PLC about the potential integration of their telecommunications businesses in the U.K.
The Spanish telecommunications company said it that talks were ongoing “on a potential integration of their respective telecommunications businesses in the United Kingdom” and there was no guarantee that an agreement can be reached.
The announcement follows press reports that the two companies were in talks about the merger of Telefonica's O2 and Liberty Global's Virgin Media.
A combination of O2 and Virgin Media could create a business with an estimated enterprise value of about $30 billion, according to analysts at Goldman Sachs Group Inc. The combined entities would take 34% of Britain’s telecom service revenues between them, eclipsing the current No. 1 operator BT Group Plc, according to research from Goldman Sachs published Friday. If successful, the new venture would be BT’s only rival offering customers fixed-line and mobile services.
For Telefonica, a U.K. merger would advance a strategy change announced in November. It’s focusing on four core markets of Spain, Brazil, the U.K. and Germany and considering all options for the rest of its Latin American units.