Virgin Media O2 and Daisy Group are to unveil a merger of their business communications and IT operations in a bid to create a £3bn telecoms powerhouse.
Sky News has learnt that the two companies will announce later on Monday that they are to combine to form a company with annual revenues of about £1.4bn.
Virgin Media O2 will own 70% of the new business, while Daisy Group will own 30%.
The tie-up will create a stronger challenger to BT Group, Britain’s biggest provider of IT and telecoms services to small and medium-sized businesses (SMEs).
The new VMO2-Daisy business will have roughly 700,000 customers, and be valued at between £2.5bn and £3bn including debt.
Combining the two operations is expected to produce substantial cost savings, according to one insider.
Telecoms industry sources said that Matthew Riley, the Daisy Group founder, would chair the company, while Jo Bertram, the managing director of Virgin Media O2 Business, would be its chief executive.
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It is the latest in a string of deals engineered by Mr Riley since he founded Daisy in 2001.
One source said it was likely to be subjected to rigorous scrutiny by the Competition and Markets Authority, but was not expected to encounter any major obstacles.
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Both VMO2 and Daisy have been contacted for comment.
