Pop quiz: What do you get when you merge one major connectivity and communications business’s next-gen fibre and mobile infrastructure with another IT service business’s suite of platforms and leading customer service? A meteoric game-changer in the UK’s telecoms, communications and IT space.
That’s just what happened this week, with Daisy Group merging with Virgin Media O2 Business (VMO2) to form a £3 billion behemoth. It’s a seismic event in the UK B2B tech world. But how exactly did this happen? What attracted these two already-major players to one another to form one complementary titan?
“Why was I attracted? I was attracted to it because they’ve got over 500,000 customers,” a visibly (and understandably) delighted Matthew Riley, Daisy Group CEO (and now combined business Chairman), told UC Today. “That’s a really, really big customer base that’s predominantly been mobile and connectivity.”
What we bring with Daisy is a lot more cloud-based technology that we can sell to those customers, as customers want to digitalise. We see it as a great opportunity to help customers on that digital journey.”
“Basically, VM02, the business element of it, sat underneath the huge consumer brand that is Virgin Media 02, and it got lost in the numbers a little bit, I think it’d be fair to say, without being too disparaging,” Riley continued. “I think it was less than 10 percent of the revenue, less than five percent of the profit.”
“So it didn’t get the attention it’ll get from us, because all we do is B2B. We serve business customers up and down the country. That’s all we’ve done for 24 years. That’s what we do day in and day out. We don’t have a consumer business to worry about or even think about. So I think, first of all, it’ll give it, hopefully, some entrepreneurial flair, and a little bit of a different view on things.
Virgin Media O2 will hold a 70 percent stake in the newly formed venture, with Daisy Group retaining the remaining 30 percent. After onboarding the 500,000 VMO2 customers that Riley outlined, the merged entity will count an estimated customer base of around 700,000, illustrating a significant expansion of its footprint in the SME sector.
For Riley, the synergies between the two companies couldn’t be more perfect. These were two companies that promised a marriage made in product heaven.
“Virgin Media O2 has two amazing assets,” Rile elaborated. “One is the fibre network, which is second only to BT, and the other is their mobile network, which is 5G-ready and again only really rivalled by Vodafone and EE. So, it’s a massive opportunity from a product perspective.”
“We spend a lot of time speaking to business customers, and one of the things they say to us is, ‘We live in a more complex world than we did before COVID.’ But since COVID, people have been doing things like Teams calls every day. They’re also managing payments digitally. They have to have online purchasing, procurement, etc., so the UK B2B market is starting to digitalise.”
It’s trying to find someone you trust to help you on that path. I think that’s where we become that trusted advisor, really. We can take people from just having a plain old connectivity product right through the cloud, antivirus, spam, cloud hosting, etc.”
As Riley alluded, another key benefit from the merger from Daisy Group’s perspective is the enhanced product portfolios they can now offer customers, from AI-powered cloud communications and 5G private networks to sophisticated cloud storage solutions and advanced cybersecurity systems. That array of cutting-edge services is a significant market differentiator, with Riley keen to highlight the transformative potential of cybersecurity services, especially for SMEs.
“Every time you pick up the paper every week, there’s another huge cyber attack,” Riley said. “If you’re a small business, it’s really worrying because you don’t really know what to do. Most people aren’t that IT savvy, so they need some help.
“I’m an entrepreneur, I’ve built many different businesses over the years, and one of the things I’ve found quite difficult is managing my IT infrastructure. One of my first employees is still with us today. He used to laugh, saying, ‘I’m in control of anything with the plug on it,’ because I used to go to him and say, ‘You understand this stuff.'”
“But it’s really hard if you’re a small business, right? You can’t afford an IT director and things like that, so you’ve got to go somewhere where they’re trusted, they’ve got a broad range of skills, and a broad range of products, and that’s what we offer at Daisy.”
Even selling Microsoft will be an enormous boon for the combined entity because VMO2 didn’t really encompass that market, whereas Daisy is a “massive Microsoft house”, as Riley put it. “All these customers are still buying it; they’re just not buying it through us.”
The combined entity can now offer that single pane of glass, Microsoft’s suite included.
I always think of it as a from a customer’s perspective, they want one relationship, where they’re trusted and they go, ‘Well we’ve got this, can we now extend our cloud capability, we need some more storage, we’ve got a marketing campaign, can you help us?’ It’s more of a conversation; they know that we’re there and can turn that on or off when needed.”
Daisy Group and Riley are executing this on the back of what the customers are telling them: they want one supplier to be able to provide them with all their technology needs. “We think that’s the real deal; that’s where we see the future going,” he added.
With 700,000 customers, a joint £1.4 billion in annual revenue, high-quality customer service, and an extensively deep and diverse product portfolio, the combined business is well-positioned to become a serious competitor to BT Group, the UK’s dominant provider of IT and telecoms services for SMES. However, that doesn’t mean there aren’t market opportunities in the large enterprise space.
“As the customers get bigger, they tend to have IT teams and things like that, but they’ve still got the same problems and need people to help them fix them,” Riley highlighted. “It’s just that they’ve got physical bodies on site to actually implement some of this stuff, whereas some of the smaller ones don’t have that, so we’ll provide that for them. But yeah, absolutely, the same issues still apply there. We supply large enterprise customers, and certainly, as part of the O2 and Virgin Media base, there are some huge enterprise customers in the public sector.”
The need for cutting-edge cybersecurity solutions in particular often transcends business size or scale: “You look at Marks & Spencers and go, ‘Wow.’ They’ve got an enormous IT division with CTOs and CIOs, and it can also happen to them, so I think it is a worry for everybody.”
This is all very exciting for the business itself, but what about existing Daisy Group employees, customers, and partners? What can they expect from this momentous news? For employees, Riley emphasised that the merger’s success is also tied to creating something that’s even more exciting and “gives our employees more of an opportunity to develop their careers”.
“In the short term, you shouldn’t see any difference in service,” Riley affirmed to customers.
In the longer term, we’re hoping you’ll see an improvement in service as we start to bring customers onto one platform, single bill, single log-on. We want to implement all the things that Daisy can do today into the customer base within Virgin Media O2, using our technology stack that we’ve built over the last 20 years to allow customers more flexibility.”
“What I rate the success of this merger on is what our customers think. Have we improved the experience that those customers now get? I think it will probably take 12 to 18 months to start seeing a real significant improvement in customer service, but that’s an absolute must.”
“It’s exactly the same again with partners,” he continued. “We know a lot of the channel partners in the UK. We’ve been in the market for a long time. Again, I think what we are really well known for is not only really good customer service but also a variety of products for our partners to be able to sell. I think, again, Virgin Media O2 have been great at selling connectivity and mobile, but missed a big part of the IT chain, and that’s where we think we can come in, and we can get our partners to resell that and earn commission out of doing it.”
In Riley’s mind, those areas are “probably the most important ones that aren’t financial”. But as he suggests, if you have happy customers, employees, and empowered partners, “the finances will take care of themselves”.
“Although,” Riley laughed, “because I’m not an accountant, I will always look at those things slightly differently!”
