Telefónica, Liberty Global unite in the UK

Denver (Colorado), United States and Madrid, Spain - May 7, 2020.

• The joint venture, 50% owned by both companies, will join Virgin Media , which owns the UK's fastest broadband network, and O2, the country's largest mobile platform.
• The combination of the two companies will lead to a stronger integrated provider of fixed and mobile services in the British market, which will drive the expansion of Virgin Media's high-speed network and the deployment of O2's 5G network, to the benefit of customers, private companies and the public sector.
• The fully converged new platform will put the customer at the center of its strategy and will have the scale to innovate in a changing digital environment, investing £ 10bn in the UK over the next 5 years.
• The joint venture is expected to generate substantial synergies , valued at £ 6.2 billion, in terms of net present value and excluding integration costs. This equates to synergies of costs, capex and revenue of £ 540 million per year from the fifth year after the transaction closes.
• Attractive valuation of both companies: O2 is valued at £ 12.7 billion and Virgin Media at £ 18.7 billion, both in terms of total company value ("EV"). O2 will be provided to the JV debt free, while Virgin Media will be provided with 11.3 billion net debt and the like.
• Both parties expect to receive total net cash funds at the closing of the transaction and after executing a series of recapitalizations that will generate revenues of £ 5.7 billion for Telefónica and £ 1.4 billion for Liberty Global (after discounting a compensation payment to Telefónica amounting to £ 2.5 billion).
• The joint venture sets a net debt target of between 4.0x-5.0x and the funds from free cash generation and future financing will be shared equally between Telefónica and Liberty Global.
• The transaction is expected to close in mid-2021. The operation is subject to the corresponding regulatory approvals, the execution of the aforementioned recapitalizations, as well as other usual closing conditions in this type of operations.

Telefónica CEO José María Álvarez-Pallete stressed: "Combining O2, the number one mobile operator in the UK market, with Virgin Media's high-capacity broadband network and entertainment services is a point of Inflection in the British market, at a time when the demand for connectivity has never been so high or so critical We are creating a strong competitor, with a significant scale and financial strength to invest in digital infrastructures in the United Kingdom, offering more options and bring greater value to millions of consumers, businesses and customers in the public sector. Today we create a leading convergent operator in the UK, which is a source of pride for both partners.

For his part, Mike Fries, CEO of Liberty Global, said: "We could not be more satisfied with this union. Virgin Media has redefined broadband and entertainment in the UK, providing the fastest and most innovative video platform. O2 is recognized in the market as the UK's most trusted and admired mobile phone operator, always putting customer needs first. With Virgin Media and O2 working together, the future of convergence is here today. Hand in hand the benefits of fixed-mobile convergence in Belgium and the Netherlands. When the power of 5G joins 1 gigabyte fixed broadband, consumers and businesses in the UK will never look back anymore. We are committed to this market and aligned with the objectives of digitization and connectivity of the Government itself”.

Strategic combination

Liberty Global plc. (NASDAQ: LBTYA, LBTYB and LBTYK) and Telefónica, SA (Madrid, Lima and NYSE: TEF) have today announced an agreement to unite their businesses in the United Kingdom and form a joint venture 50% owned by both companies (the "JV"). The combination of Virgin Media with O2 will lead to a nationwide integrated telecommunications provider with more than 46 million video, broadband and mobile connectivity subscribers and revenues of £ 11 billion.

By combining Virgin Media's leading v6 video service and high-speed broadband network (giga-ready) with O2's unrivaled business propositions, including new 5G technology, British customers will be able to enjoy the best experience customer base, with superior connectivity and entertainment offerings, both inside and outside their homes. As a fully converged provider, the JV will provide a higher level of market competition and more choice for consumers.

Additionally, the JV will become a leading competitor in the B2B segment. On the one hand, the adoption of converged fixed-mobile services by companies that are already Virgin Media and O2 customers will accelerate, and on the other, it will allow offering new services using digital capabilities, as well as networks and a broad portfolio of services of both companies, such as cloud, big data, IoT and cybersecurity. This will create a sustainable level of competition within the SME and large business market across the UK, benefiting the UK economy as a whole.

This is a machine translation of the original press release issued in Spanish.