Virgin Media/O2 merger could reshape the UK telecoms industry by creating a new giant

The Virgin Media/O2 merger announced earlier on Thursday is set to bring some headaches to other telecoms players if approved by the authorities.

The new entity could offer a full range of services in a so-called quad-play of broadband, mobile, entertainment and telephony to Virgin Medias 6mln customers and O2s 26mln direct mobile users – it also serves 34mln non-direct clients such as Tesco mobile.

READ: O2 and Virgin Media agree merger to pile pressure on BT[hhmc]

The new £31bn powerhouse would be a big rival for BT Group PLC (LON:BT.A), meaning players such as Vodafone PLC (LON:VOD), Talktalk Telecom Group PLC (LON:TALK), Sky and Three would be up against two behemoths.

For BT, its been a tough market since the acquisition of EE in 2016, which allowed it to offer quad-play services.

The Openreach division is expected to benefit from the roll-out of fast broadband across the country, however there has been pressure to dismantle the monopoly: some think industry regulator Ofcom may finally pull the trigger.

“The requirement for more internet connections at ever-increasing speeds is a given for the UK consumer, but this also comes with expectations of lower prices,” said Richard Hunter, head of markets at interactive investor.

BT and Sky both cut prices earlier this year after Ofcom pressured the industry to improve “customer fairness” with new rules to encourage customers to switch between mobile and broadband contracts, removing the “loyalty penalty” where ongoing customers miss out on many of the cheapest deals.

UBS at the time said changes in prices were “likely to dampen hopes that the competitive environment in UK broadband is easing”, which may go through the roof with the potential quad-play services offered by Virgin Media and O2.