Telefonica and Virgin Media merger approved by CMA and pair set sights on BT’s dominance
Following a provisional clearance last month, the Competition and Markets Authority (CMA) is now allowing the proposed merger of Virgin Media/Virgin Mobile with Telefonica, who own O2, to go ahead.
As a result, broadband giant Virgin and mobile phone operator O2 have today officially announced their merger, creating a new entertainment and telecoms giant that could rival the dominance of BT.
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, following the merger, 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 their retail prices which would negatively impact consumers.
The merger was referred to a group of independent CMA Panel members for an in-depth investigation and the group has concluded that the deal is unlikely to lead to any substantial lessening of competition.
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.”
During the initial discussions, Mike Fries, CEO of Liberty Global, said: “Virgin Media has redefined broadband and entertainment in the UK with lightning-fast speeds and the most innovative video platform. And O2 is widely recognised as the most reliable and admired mobile operator in the UK.”
Telefonica’s Chief Executive Jose Maria Alvarez-Pallete continued: “Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical.”