CMA launches phase 2 investigation into £31bn Virgin O2 merger

The Competition and Markets Authority said on Friday that it has launched an in-depth investigation into the proposed £31bn merger of Virgin Media and O2.

The Phase 2 investigation has been launched immediately after Virgin and O2 requested the CMA move quickly to the second phase of its probe through a ‘fast-track’ process.

The competition watchdog noted that both Virgin and O2 provide certain wholesale services to other mobile network operators in the UK - wholesale mobile services and mobile backhaul, respectively. "The CMA is concerned that, following the merger, Virgin and O2 may have an incentive to raise prices or reduce the quality of these wholesale services, ultimately leading to a worse deal for UK consumers," it said.

Merging companies can ask for a case to be fast tracked to Phase 2 "where there is sufficient evidence at an early stage of the investigation for the CMA to conclude that there is a realistic prospect that the transaction would result in a substantial lessening of competition in one or more markets".

Broadband provider Virgin Media and mobile phone group O2 announced in May that they had agreed to merge. The 50:50 merger values Telefonica’s O2 at £12.7bn and Liberty Global’s Virgin Media at £18.7bn.