Liberty Global and Telefónica will appoint Lutz Schüler as Chief Executive Officer and Patricia Cobian as Chief Financial Officer of the proposed 50-50 joint venture combining Virgin Media and O2. The merger is subject to approval by the Competition and Markets Authority (CMA) in the UK.
Lutz Schüler joined Virgin Media in 2018 as Chief Operating Officer and has been CEO at Virgin Media since June 2019. Prior to that, Schüler spent more than seven years as CEO of Unitymedia GmbH, Liberty Global’s highly successful German operation, which was sold to Vodafone in 2018. During his tenure at Virgin Media he has transformed business performance with the acceleration of 1 Gig broadband, the rollout of new entertainment and smart WiFi services and the market’s first fixed-mobile bundles. Schüler is a 27-year veteran of the telecoms industry, beginning his career at T-Mobile Deutschland in 1994 and later serving in various senior management roles, including Chief Operating Officer, with Telefonica’s O2 German subsidiary from 1998 to 2010.
Patricia Cobian is currently Chief Financial Officer for O2, a position she has held since 2016. During a 15-year career with Telefónica she has held a number of senior management positions. Before taking on her current role, Cobian was Director for Business Development in Telefónica Europe, where she led strategy, marketing innovation and played a key role in a number of partnerships, spectrum auctions, infrastructure sharing deals and key acquisitions and divestitures in the region. She also led the post-merger integration planning of Telefónica Deutschland with ePlus. Before joining Telefónica, Cobian was a consultant with the TMT and Corporate Finance practices of McKinsey & Company.
Mike Fries, CEO of Liberty Global, and José Maria Alvarez-Pallete Lopez, CEO of Telefonica, commented: “We are about to embark on an exciting new chapter for Virgin Media and O2, and Lutz and Patricia are the right leaders to deliver on our ambition to create the UK’s national connectivity champion. Together they will build a strong, diverse and dynamic team that will bring more choice, more value and world-class innovation to over 46 million fixed and mobile customers and the broader consumer and enterprise market.”
Liberty’s Virgin Media to merge with Telefónica’s O2
Liberty Global plc and Telefónica SA will merge their operating businesses in the U.K. to form a 50:50 joint venture focused on broadband + mobile + video + entertainment consumer services. O2 is the largest mobile platform in the UK, while Virgin Media claims to be the nation’s fastest broadband network.
The “fully-converged” JV is also expected to become a leading challenger in the B2B space as the combination will accelerate the adoption of converged fixed-mobile services to Virgin Media’s and O2’s existing business customers.
The JV will have an approximate annual turnover of £11 billion, and 46 million mobile, home, and business connections.
The companies cite significant operating benefits for the JV, with estimated run-rate cost, CAPEX and revenue synergies of £540 million on an annual basis by the fifth full year post closing, equivalent to a net present value of approximately £6.2 billion post tax and net of integration costs, as well as significant synergies from the accelerated usage of existing tax assets. The vast majority of the benefits relate to demonstrable cost and CAPEX synergies, with an annual run-rate of approximately £430 million out of which approximately 80% are expected to be achieved by the third full year after the closing.
CAPEX synergies:
- Use of existing infrastructure to provide services for each entity’s customers at lower cost compared to standalone / wholesale capabilities;
- Migration of Virgin Media mobile traffic to Telefonica UK’s network;
- Combination of regional and national network infrastructures and IT systems;
- Reduction in combined marketing expenditures;
- Potential to reduce general and administration costs; and
- Site rationalization
