In a joint venture, Virgin Media O2 Business and Daisy Group have announced the creation of a new UK B2B company, with ownership split 70% Virgin Media O2 and 30% Daisy Group.
The new entity will have £1.4bn ($1.9bn) in pro forma revenues and the deal is expected to close in early H2 2025.
This marks a significant next step in the consolidation of the UK enterprise telecoms market, which is oversupplied at every level from infrastructure to value-added reseller – this is no bad thing for UK plc as businesses of all sizes benefit from competition to attract their custom. But consolidation is also being driven by necessity for investment in both fibre and mobile networks, and in growth services such as AI, cybersecurity, and cloud services – these are expensive and margins in traditional connectivity are low.
The consolidation debate
UK combinations are also a microcosm of the ongoing debate about consolidation across Europe – everyone realises it is necessary, but no country wants to lose control of its national champion.
Let’s be honest, it is not really a single market in telecoms – it is multiple national markets with EU oversight. It is expected that at some point consolidation will happen and the dam will burst – but this expectation has been around for years.
The fact that the proposed Virgin Media O2-Daisy Group joint venture will be focused on the enterprise market is a good start and will build on the traditional strengths of both partners, covering the small business market in particular (including the channel) and also larger corporates and public sector customers. It also has the potential to exploit the fixed and mobile infrastructure that underpins Virgin Media O2’s services, and to instill the entrepreneurial spirit of Daisy.
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By GlobalDataJoint venture challenges
Of course, the combination will not be easy. Any joint venture deal poses challenges and this one is no different.
Aside from the technological challenges of combining, phasing out and evolving existing networks, systems, and processes, there is also the challenge of organisational change – synergy savings usually means headcount reductions. And then we come to two more key elements: for the moment, branding will remain the same, which means a combination of legacy brands like Virgin Media, O2, and Daisy – all of which have historically different associated values. Currently, it looks messy. Next comes ‘customer ownership’ – this should be easily manageable for the medium-sized, corporate, and public sector segments.
However; there are always issues between direct and indirect channels when it comes to smaller businesses, and it gets even more complicated when targeting SOHO (Small Office Home Office) customers who often straddle Business and Consumer divisions of service providers.
If the new joint venture can successfully resolve these issues, it will be in a stronger position to challenge the likes of BT and Vodafone – but the challenges should not be underestimated.
