Virgin Media dumps BT's mobile network to hop into bed with Vodafone

Updated Broadband and cable business Virgin Media has inked a five-year deal with Vodafone UK to provide its network to more than three million customers.

The mobile virtual network operator (MVNO) deal will replace Virgin Media's current agreement with BT, which expires in late 2021 and began in January 2017.

Lutz Schüler, Virgin Media CEO, said: "Twenty years ago Virgin Mobile became the world's first virtual operator and this new agreement builds on that heritage."

"We've worked with BT to provide mobile services for many years and will continue to work together in a number of areas. We want our customers to have a limitless experience – it's now the right time to take a leap forward with Vodafone to grow further and faster," he added.

Vodafone will supply the wholesale mobile network services, including both voice and data, to Virgin Mobile and Virgin Media Business, which will also have access to Voda's 5G network.

In a joint press release, the businesses said that as a "full MVNO", Virgin will control the products and services, which means existing customers will not need to change their SIM cards. Further details on products and network transition will be provided in due course.

The pair also said a "complementary and extensive wholesale agreement has also been struck between both parties in relation to the supply of network services by Virgin Media Business to Vodafone".

Industry talk of a merger between Vodafone and Virgin's parent, Liberty Global, have been floating around for many years, but the two have never quite got it on.

Earlier this year, the European Commission approved Vodafone's €18.4bn acquisition of Liberty Global's cable business in Germany, the Czech Republic, Hungary and Romania.

No doubt the money from the MVNO deal will be a welcome boost to Vodafone's coffers since its Liberty gobble will leave it even more strapped for cash. In its last full-year results for the 12 months ended 31 March, the group said net debt stood at €27bn.

After disappointing first-quarter numbers this year, Vodafone announced plans to offload its massive masts business. It hopes stock market flotation next year could be worth as much as €20bn (£17.9bn).

Paolo Pescatore, telecoms analyst at PP Foresight, said the deal cements a growing relationship between both parents in other European markets. "For years, Virgin Media has been hampered with its current EE deal. This latest deal will give the MVNO more flexibility to compete with rivals."

"Look at how long it took Virgin Media to offer 4G. There didn't seem to be much flexibility in the relationship. "This seems like a step closer to a merger between both companies. More so in light of developments in other markets. There are still challenges including the valuation and potentially Vodafone’s fixed line investment with Cityfibre," he added. ®

Updated to add

A BT spokesman got in touch to say: "The successful relationship between BT and Virgin Media spans nearly 20 years and they remain a highly valued customer. We will continue to provide a full spectrum of mobile services to Virgin Media and support Virgin Mobile customers under our existing MVNO agreement, until they transition in 2022."