Virgin Media, O2 Combine to Create New Telecom Giant (4)

Telefonica SA and Liberty Global Plc have agreed to create the U.K.’s largest phone and internet operator, threatening their rivals and marking another industry-defining deal for billionaire John Malone.

The deal values the combination of Telefonica’s O2 with Liberty’s Virgin Media at 31.4 billion pounds ($39 billion). The companies said in a statement Thursday they plan a joint venture with equal stakes that will account for Virgin’s higher value -- and debt load -- with a payment to O2.

The transaction, first reported by Bloomberg, is a chance for both parent companies to rework two mid-tier rivals into a ...