Virgin Media O2 Merger

Strategic Analysis

Throughout the explanation, we will be conducting a strategic analysis. The analysis will involve SWOT and financial analysis to conduct an in-depth examination of the merger.

SWOT analysis

The SWOT analysis has two types of elements external and internal.

The internal analysis includes:

Strengths – These are the things the business is good at and has a competitive advantage in. It can be human resources such as employing many talents, strong brand image, consumer loyalty etc.

Weaknesses –These include internal things that the business is lacking, and may be harmful to the organisation. For example, debt, lack of using new technology etc.

The external analysis includes:

Opportunities – Businesses cannot control these factors but they are beneficial for the organisation. These may include new technology, lower production costs abroad etc.

Threats – These include external factors that may be harmful to the organisation. For example, competitors entering the market.

The financial performance analysis involves an income statement that indicates the company's revenues earned and the expenses incurred over a period of time.

On the other hand, a balance sheet also known as the statement of financial positioning shows the assets and liabilities of a company for a specific period.

Additionally, financial ratios are also used to analyze a company's financial performance, they include return on capital employed, net profit margin, gross profit margin and current ratio.

Before Virgin media was created, Virgin Mobile, the UK phone network was established in 1999 by Richard Branson. The other companies that were strongly competing in the cable market were NTL and Telewest that have merged together and acquired Virgin Mobile for £ 962 million in 2006. In 2007 the merged company NTL Telewest had named the whole company Virgin Media.

In 2013, Virgin Media along with other Virgin brands was acquired by Liberty Global which is the world's biggest broadband company, that operates in more than 10 European countries.

Currently, Virgin Media provides services such as phone, broadband internet, and television services over the cable network.

Moreover, Virgin Media's CEO from 2019 and Virgin Media-O2's CEO from 2021 is Lutz Schüler.

Strengths of Virgin media

It is crucial to identify the strengths of Virgin Media as it will help to explain what Virgin Media has to offer to the merger. The key strengths are:

• Implementation of advanced digital technology that makes Virgin Media services more effective and efficient
• Offers multiple services such as phone, broadband, and internet that are essential for consumers.
• High brand recognition.
• Virgin Media has a highly loyal consumer base.
• Virgin Media holds the title of being the biggest cable provider in the UK.

Opportunities of Virgin Media

Virgin Media's opportunities include the following:

• Despite being the number one cable company in the UK, Virgin Media does not take the lead in other services such as internet and mobile phone services. There is an opportunity to invest in those services or collaborate/merge with the leading providers in these types of services.
• Invest in employees, by providing education courses and staff training which should increase consumers' loyalty and lower staff turnover.
• Virgin Media can take advantage of the increased globalisation, and expand to countries outside of Europe, which could assist in increasing profit margins.

Weaknesses of O2

• Even though O2 has been performing well in terms of sales, the company has not been performing well in terms of marketing. This gives an opportunity for competitors to persuade consumers to switch service providers through promotional campaigns, for instance.
• O2 falls behind with innovation compared to industry leaders.

Opportunities of O2

• Expanding by entering markets in the new countries.
• Investing more in research and development and collaborating with companies that have a high level of innovation.

Threats of O2

• The competitors including Vodafone, Three UK and EE can be part of the threats, as consumers can easily switch to those providers.
• New entrants to the mobile market can also be a threat if they offer better deals. O2 consumers may switch to them.
• New innovation developments by competitors, which may lower prices and offer better services can put a risk on O2 in regards to losing its customers.

Virgin Media O2 logo

The Virgin Media and O2 logos have been merged in order to create a Virgin Media-O2 logo. The logo is designed in the shape of the Virgin Media logo and is similar to the shape of the infinity symbol. Virgin Media-O2's logo can be easily recognised by consumers who already know at least one of the two companies involved in the merger.

Looking at the logo design from the marketing point of view, the combination of two logos with no direct changes was influenced by already existing strong brand recognition from both providers Virgin Media and O2. This is one of the reasons why logos were combined instead of developing a new logo for the Virgin Media-O2 merger.

Virgin Media-O2 service product

Virgin Media-O2 has developed a new service product called Volt which involves more benefits than Virgin Media and O2 offers separately. The Volt plan allows customers to use double data on the O2 monthly mobile plan and the fastest broadband from Virgin Media that is available in the area. Additionally, the Volt plan allows consumers to use the O2 WI-FI with no additional costs as well as offers a £ 150 discount on the O2 custom plan.

We will analyze this strategic move of introducing a new service product using SWOT analysis. First, the main objective of this strategy was to offer consumers the convenience of being able to use the services of both providers with one contract and to get extras such as faster internet or more data, which are the main strengths of this service product.

Key functions of investor relations are sharing financial information, communicating with stakeholders, and marketing.

The way Virgin Media-O2 (VMO2) maintains positive relations with investors is by publishing financial results on its website for each quarter. These financial results are organised into key categories such as:

Fixed-line customers

This category involves consumers that use a minimum of one broadband service offered by VMO2 which can include broadband, TV or home phone services. These statistics exclude any mobile services used.

Total mobile connections

In summary, the merger between Virgin Media and O2 was a successful strategy from the perspective of both companies. The merger capitalised on the strengths of the merged companies, as Virgin Media's innovation edge enabled the merger to be very innovative and develop a service product called 'Volt'.

In addition, Virgin Media O2 capitalised on O2's strengths and provided a leading mobile network for its customers. As the merger has been developed by combining two well-known companies, this has resulted in great brand recognition and customer loyalty.

Overall, the strategy of combining two companies by offering both mobile and broadband services as a single company is a great move. This way O2 customers are likely to use Virgin Media and vice versa, as it is cheaper to use both services than to use each separately. In this way, Virgin Media-O2 will be able to generate higher revenues and compete against other providers who only offer one of the two services.

Virgin Media-O2 clearly spotted the opportunity to combine services. Getting existing customers to use both services rather than just one. This will have a positive impact on both the Virgin Media-O2 merger and on both companies individually. In addition, another opportunity for the company is to continue developing innovative features for this service product.

Weaknesses and threats of this product are that regardless of the benefits that the Volt plan offers, it may be a little bit pricey and lengthy for some consumers. Therefore, competitors may try to copy the idea and attempt to replicate it for a more affordable price.

This name is given to the merger because it clearly highlights the companies involved in the merger. The reason for this is that Virgin Media and O2 are already widely known to consumers. If the company is known to customers, they are likely to recognise it, trust it, and become consumers of it.