Virgin Media O2 and Daisy Group have announced plans to merge their complementary direct B2B operations to create a major new force in the UK business communications and IT sector. Virgin Media O2 Daisy merger

The company will be supported by fixed and mobile connectivity wholesale agreements with Virgin Media O2, and supplier arrangements with Telefónica and Liberty Global to leverage high-growth products and services from across the portfolio of those wider shareholder groups.

Virgin Media O2 and Daisy Group Unite to Form B2B Powerhouse

The newly formed entity will combine Virgin Media O2 Business and Daisy Group, with Virgin Media O2 holding a 70% stake and Daisy Group owning the remaining 30%. This strategic partnership is projected to generate approximately £1.4 billion in annual pro forma revenue and around £150 million in adjusted core earnings based on 2024 performance.

The merger aims to leverage Virgin Media O2’s robust fixed and mobile infrastructure alongside Daisy Group’s digital-first operations and modern IT systems. The combined entity will offer a comprehensive suite of services, including cloud-based communications tools, 5G private networks, IoT connectivity, security solutions, and AI-powered products like O2 Motion.

Leadership of the new company will feature Matthew Riley, founder of Daisy Group, as chairman, and Jo Bertram, managing director of Virgin Media O2 Business, as CEO. Initially, both businesses will continue to operate under their separate brands from their current office bases.

Transaction details and financial profile

Based on 2024 performance, the combined entity is expected to generate £1.4 billion in revenue, £150 million in Adjusted EBITDA, and £100 million in EBITDA less Capex. Around £600 million in synergies (NPV) are projected, mainly from cost savings, reaching a £70 million annual run-rate by 2030. Over half of these benefits are expected within three years of closing, driven by network integration, cost reduction, IT unification, and cross-selling.

The deal will involve a £425 million secured loan from Virgin Media O2 and £835 million of Daisy Group debt, with Virgin Media O2 raising further funds to refinance Daisy’s facilities. The transaction will be fully consolidated by Virgin Media O2, with limited short-term impact on leverage, which will stay within its 4x–5x target range. Shareholder payouts will align with Virgin Media O2’s policy, with an initial focus on deleveraging.

Founded in 2001 by Matthew Riley, Daisy Group is a leading UK provider of cloud, communication, and IT services, having grown rapidly through acquisitions. The deal is expected to close in early H2 2025, pending regulatory approval.

Implications for the UK Telecom Market

This merger signifies a notable consolidation in the UK’s telecom sector, particularly within the B2B segment. By combining resources and expertise, the new entity is poised to offer enhanced services to a broad range of UK businesses, from small offices to large enterprises and public sector organizations.

The deal follows a broader trend of consolidation in the UK telecom market. Notably, the Competition and Markets Authority (CMA) approved a £16.5 billion merger between Vodafone UK and CK Hutchison’s Three UK in December 2024. This merger is set to create the UK’s largest mobile network operator, serving over 27 million customers, and includes commitments to invest £11 billion in 5G infrastructure and implement short-term customer protections to address competition concerns.

Analysts suggest that these consolidations could lead to improved infrastructure investment and service offerings. However, there are concerns about reduced competition potentially leading to higher prices for consumers. The CMA’s approval of the Vodafone-Three merger was contingent upon legally binding commitments to mitigate such risks.

In the context of the Virgin Media O2 and Daisy Group merger, the focus on B2B services may alleviate some competition concerns, as the combined entity aims to enhance digital capabilities and provide comprehensive solutions to business customers. This move could stimulate further innovation and investment in the UK’s enterprise telecom sector.