Yahoo Finance Virgin Media O2 in early talks to buy TalkTalk
Virgin Media O2 is in early talks to buy TalkTalk in a deal that would strengthen the broadband-to-streaming company's challenge to the dominance of BT.
Bankers at LionTree working on behalf of Virgin Media O2 and owner Liberty Global have sounded out TalkTalk after its owners hoisted a for sale sign over the company, sources said.
A takeover would bring together Britain's third and fourth largest broadband providers, catapulting Virgin Media O2 above Sky to become the UK's second biggest internet business. It would also bolster the Liberty Global-owned company's ambitions to take on BT, the UK's largest provider.
Such a sale could prove to be the first of many deals in the telecoms industry, with the likes of Vodafone, BT and Virgin Media O2 urging regulators to let companies merge in order to make better returns.
If a deal is struck, it would bring together TalkTalk's 4.2m customers, with Virgin Media O2's 47m across mobile, broadband and cable TV.
The prospect of a much bigger challenger emerging prompted shares in BT to fall more than 5pc to 176p in afternoon trading.
Sir Charles Dunstone, TalkTalk's founder, struck a £1.1bn deal last year to de-list the business with Martin Hughes' Toscafund, the hedge fund tycoon nicknamed "the Rottweiler" for his controversial approach to investments.
While TalkTalk has reportedly attracted interest from the pay TV giant Sky and Vodafone, the latter has made clear its priorities lies with deals in the mobile market. Vodafone has a widely reported interest in rival operator Three UK.
Virgin Media O2's interest comes after Sir Charles' ill-fated attempt to combine TalkTalk with O2 five years ago as part of the mobile operator's proposed £10bn float in London.
The deal collapsed when O2's owner Telefonica pulled out of the listing because of Brexit and went on to pursue a mega-merger with Virgin Media last year.
Telecom bosses including Lutz Schuler, the chief executive of Virgin Media O2, have been lobbying the media regulator Ofcom to soften its stance on industry mega mergers so they can make better returns from upgrading Britain's mobile and broadband networks.
Banking sources said that Virgin Media O2 could be eyeing a potential swoop in order to bolster its position in the cost of living crisis by creating its own cut-price internet offer.
Mr Schuler is also eager to grow the company's business-to-business broadband position, with TalkTalk among the leaders in that section of the market.
The Telegraph revealed in May that TalkTalk was pursuing a deal to seize control of Ovo Energy's broadband customers after snapping up the network provider Virtual1 for £100m.
Virgin Media O2, Liberty Global and TalkTalk declined to comment.
