May 7, 2020

Virgin Media and O2’s tie-up will leave customers cold

A powerhouse in broadband and mobile, able to compete toe-to-toe with BT and its EE division and benefit from substantial cost savings, would force remaining mobile operators and broadband providers to cosy up to each other. It'll juice up the JV with debt of four to five times ebitda, make some tidy cost savings, take out cash of £1.4bn and reserve the option to list the thing in three years' time. Virgin has been offering mobile for years, piggybacking off EE's network. As James Ratzer of New Street Research points out, it hasn't got any more mobile customers now than it did a decade ago. The AA said revenues rose 2 per cent in the year to January, earnings before interest, tax, depreciation and amortisation rose 3 per cent to £350m. But more importantly, analysts forecast the group's 2021 earnings before nasties will not be far behind this year at about £340m. Shares in the AA, which were floated at 250p apiece, rose 8 per cent to 28.5p. That's 2.4 times relatively visible earnings.

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