O2 and Virgin Media form an odd couple to transform telecoms

There was something familiar about the solitary, smartly dressed Spaniard approaching Virgin Media’s London headquarters at Griffin House, an unlovely low-rise in the shadow of the Hammersmith flyover.

Some of those who spotted the unusual caller eventually placed him. But what was Jose Maria Alvarez-Pallete, chief executive of Telefonica, Spain’s former state telecoms monopoly and owner of the mobile operator O2, doing there? And why was the man known in the telecoms industry as JMAP without his usual retinue of assistants and advisers?

The plot behind that discrete visit in 2016 – later developed and code named “Project Pink” – was finally revealed last week when Telefonica and Liberty Global, the New York-listed owner of Virgin Media, announced a £31bn merger of their UK businesses in the midst of a pandemic.

Mike Fries, chief executive of Liberty Global, told analysts the deal and its timing have nothing to do with coronavirus. “The timing is coincidental,” he said as investors scrambled to unpick the complex financing behind a landmark deal that few had seen coming.

Fries and Alvarez-Pallete, and their companies, make for an odd pairing in what will be an equal joint venture.

Liberty Global, controlled by the 79-year-old billionaire “cable cowboy” John Malone from his base in Denver, Colorado, casts itself as an anti-establishment financial innovator. It never pays dividends and helped pioneer share buybacks as a means of rewarding investors but minimising its contribution to the public finances, in line with Malone’s anti-tax libertarian views. Fries, 57, the son of a powerful Hollywood producer, is an extravert, heli-skiing rock guitarist who is often found in the upper ranks of America’s best-paid executives (he recently received a $5m bonus simply for renewing his contract).

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