Virgin and O2 merger referred for in-depth investigation

The Competition and Markets Authority (CMA) has referred the proposed merger of Virgin Media and Virgin Mobile with O2 for an in-depth Phase 2 investigation.

Virgin and O2 have requested that the CMA ‘fast-track’ the process.

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. The option to fast track provides flexibility in the CMA process and enables such cases to progress efficiently and quickly.

The CMA has today accepted this request given the deal’s potential impact on competition in several telecommunication markets in the UK, and the Phase 2 probe will begin immediately.

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.

UK broadband giant Virgin Media and mobile phone operator O2 have  officially announced their plans to merge in May, with the aim of challenging BT.

Liberty Global, which owns Virgin Media, and Spain’s Telefonica, which owns O2, are looking at entering a 50:50 joint venture, and the deal would combine O2’s 34 million UK customers with Virgin’s 14 million broadband, TV and mobile customers across the UK.

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.”