UK competition watchdog approves O2-Virgin merger

CMA rules merger unlikely to adversely affect market competition

The UK’s Competition and Markets Authority (CMA) has approved the merger of Virgin Media and O2 parent companies Liberty Global and Telefónica.

The news comes five weeks after the £31 billion merger was provisionally cleared by the competition watchdog, which ruled that the deal was “unlikely” to lessen competition within the UK’s telecoms market.

Thursday's decision was based on the presence of “other players” in the leased-line services and mobile networks market, such as BT Openreach, as well as the low likelihood of Virgin Media raising leased-line costs in a way that would negatively impact consumers, the regulator said.

The investigation also found that the combined company created through the merger will still have to maintain the competitiveness of its service in order to avoid losing wholesale custom.

Commenting on the decision, CMA Panel Inquiry chair Martin Coleman described O2 and Virgin Media as “important suppliers of services to other companies who serve millions of consumers”, adding that an in-depth investigation was necessary in order to “make sure that this merger would not leave these people worse off”.

“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,” he said.

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The official CMA approval comes just over a year after the merger was first reported.

On 4 May 2020, O2 parent company Telefónica confirmed that it was in talks with Virgin Media’s owner Liberty Global to create a UK-based merger as a formidable opposition to BT’s dominance in the sector. Days later, the two companies promised that the 50-50 joint venture would create £10 billion of UK investment over the next five years and deliver synergies valued at £6.2 billion.

However, a CMA investigation was triggered in October following concerns that a deal could lead to O2 and Virgin raising prices or reducing the quality of their wholesale services, or even withdrawing the services entirely - concerns which have now been dismissed.

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