Virgin Media £31bn merger with O2 given green light by watchdog

Virgin Media and O2’s £31 billion mega-merger has been given the green light by regulators.

The Competition and Markets Authority (CMA) waved the deal through after an in-depth investigation, concluding that concerns customers would see price hikes from the telecoms deal were unfounded.

The deal had provisionally been cleared to go ahead last month and officials confirmed the merger on Thursday (20 May), which was first announced a year ago.

A ‘full converged platform’

When the deal was announced, the companies said it would create a “full converged platform” for customers, and will mean an investment of £10 billion in the UK over the next five years.

A Phase 2 investigation found that the deal was unlikely to lead to any substantial lessening of competition, with investigators concluding that the costs of leased lines are only a small element of rival mobile companies’ overall costs.

As such, it is unlikely that Virgin would be able to raise leased-line costs that would result in higher charges for customers.

Investigators added that competitors in the market which are offering the same leased-line services, including larger rival BT Openreach, would keep competition healthy.

The report also found that O2 would need to remain competitive with its wholesale rivals due to strong competition.

Martin Coleman, chairman of the CMA inquiry, said: “O2 and Virgin are important suppliers of services to other companies who serve millions of consumers.

“It was important to make sure that this merger would not leave these people worse off. That’s why we conducted an in-depth investigation.

“After looking closely at the deal, we are reassured that competition amongst mobile communications providers will remain strong and it is therefore unlikely that the merger would lead to higher prices or lower quality services.”

‘A watershed moment’

O2 is currently the biggest mobile phone operator in the UK, with around 36.6 million customers across its networks, which include giffgaff, Tesco mobile, Sky Mobile and Lycamobile.

By comparison, Virgin Media has a significantly smaller reach with around 5.3 million customers.

The CMA said at the outset of the investigation that it was not concerned about overlapping retail services such as mobile, due to the small size of Virgin Mobile, but instead focused on potential wholesale services concerns.

The UK competition watchdog was only granted permission to investigate the deal after the European Commission handed over the case in November.

Under European law, the biggest mergers are generally dealt with by the commission’s regulators in Brussels, but regulators asked for the case to be handed back as it primarily only affected UK customers.

It added that any findings would come after the Brexit transition period had ended.

Mike Fries, chief executive of Virgin owner Liberty Global, and Jose Maria Alvarez-Pallete, boss of O2 owner Telefonica, said: “This is a watershed moment in the history of telecommunications in the UK as we are now cleared to bring real choice where it hasn’t existed before, while investing in fibre and 5G that the UK needs to thrive.”

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