Final regulatory greenlight for Virgin Media, O2 merger
Details
Joseph O'Halloran
| 20 May 2021
Six months after it first declared an intertest in the deal, the UK’s Competition & Markets Authority (CMA) has given its approval to what is being described as a watershed moment for UK comms market, the joint venture between Liberty Global and Telefónica to merge their Virgin Media and O2 operations.
VirginMedia network 25March2020
By clearing the transaction without remedies, the CMA has effectively seen all of its regulatory conditions met and the deal is now expected to close by 1 June 2021.

The merger could transform provision of wired and wireless communications in the UK and see a combined company that could offer genuine competition to market leader BT/EE which embarked on a similar process to merge fixed and wireless assets. Ultimately it could offer users greater choice of entertainment and faster mobile and broadband speeds.

The proposed combination of Virgin Media and O2 would create a nationwide integrated communications provider with more than 46 million video, broadband and mobile subscribers and an estimated £11bn of revenue. It would comprise O2’s core network of mobile users - as well as those from mobile virtual network operators (MVNOs) Giffgaff, Sky Mobile, Tesco Mobile and Lycamobile - along with the Virgin cable network, which is rapidly being upgraded for gigabit broadband. Crucially, it will add to Virgin’s fixed network O2’s expanding 5G infrastructure.

At the outset of its inquiry which was first announced in July 2020, the CMA said it was not concerned about overlapping retail services such as mobile, due to the small size of Virgin Mobile. It therefore focused on whether the merger could lead to reduced competition in wholesale services as part of its review.

One key area of interest was in backhaul. In this regard Virgin provides wholesale leased lines to UK telcos and O2 rivals Vodafone and Three. O2 offers mobile operators such as Sky and Lycamobile, which do not have their own mobile network, use of its wireless network to provide their customers with mobile phone services. The CMA was initially concerned that, following the merger, Virgin and O2 could raise prices or reduce the quality of these wholesale services, or withdraw them altogether. If this were to happen, the CMA warned that the quality of these other companies’ mobile services could suffer and – if wholesale price increases were passed on by these companies to their customers – their retail prices could go up.

In a joint statement on the CMA's clearance of the deal, Liberty Global CEO Mike Fries and Telefónica CEO José Maria Alvarez-Pallete called the deal a “watershed moment” in the history of telecommunications in the UK. They added: “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. Lutz and Patricia are now set to take the reins and launch a national connectivity champion that will connect more people, ignite more businesses back to growth and power more communities for the greater good.”