The merger is expected to be complete by next year, as it is subject to regulatory clearances.
Liberty Global, the US media firm that owns TV and broadband provider Virgin Media, said the agreement would unlock a £10bn investment in the UK market over five years once completed.
Mike Fries, CEO of Liberty Global, said: “We couldn’t be more excited about this combination. Virgin Media has redefined broadband and entertainment in the UK with lightning fast speeds and the most innovative video platform.
“And O2 is widely recognised as the most reliable and admired mobile operator in the UK, always putting the customer first.”
Jose Maria Alvarez-Pallete, CEO of O2 owner Telefonica, said: “Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game changer in the UK, at a time when demand for connectivity has never been greater or more critical.
“We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”
Telefonica confirmed it was in talks with Liberty Global about a merger on Monday.
O2 is the UK’s largest mobile phone operator and joining forces with Virgin Media would create an even bigger rival for BT, which owns the UK’s second-largest network EE. BT has 28 million mobile phone contracts compared to O2’s 34 million.
Additional reporting by agencies
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