UK regulator gives Virgin-O2 mobile merger green light
Britain's Competition & Markets Authority on Thursday cleared a multi-billion pound merger between broadband company Virgin Media and UK mobile network O2 after a month-long review.
Both Virgin and O2 sell wholesale services to a number of mobile operators in the UK. Virgin supplies wholesale leased lines to mobile operators and O2 provides its mobile network to companies that do not have their own.
The CMA was initially concerned that Virgin and O2 could raise prices or reduce the quality of these wholesale services. If this were to happen, it could lead to other companies being forced to offer lower quality mobile services or increase retail prices which would negatively impact consumers.
The CMA said the deal is unlikely to lead to any substantial lessening of competition. It added that the costs of leased lines were only a relatively small element of rival mobile companies’ overall costs, so it was unlikely that Virgin would be able to raise leased-line costs in a way that would lead to higher charges for consumers.
Virgin Media, which has around 5.3m customers is owned by John Malone's Liberty Global. O2, a unit of Spain's Telefonica, is the UK’s biggest mobile phone operator with around 36.6m customers across its networks, which also include giffgaff, Tesco Mobile, Sky Mobile and Lycamobile.
The CMA added that there are other players in the market offering the same leased-line services, including BT Openreach - which has a much greater geographical reach than Virgin - and other smaller providers.
As with leased-line services, there are a number of other companies that provide mobile networks for telecoms firms to use, meaning O2 will need to keep its service competitive with its wholesale rivals in order to maintain this business, the CMA said.
Martin Coleman, CMA Panel Inquiry Chair, 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."
The deal values O2 at £12.7bn and Virgin Media at £ 18.7bn, giving a combined value of £ 31.4bn including debt. The combined companies will have £11bn of annual revenue, the two owners said.