Virgin Media and O2 merger faces in-depth investigation by regulator
The UK competition regulator has launched a full in-depth investigation into the £31bn merger of Virgin Media and O2.
Liberty Global and Telefonica, the respective owners of Virgin Media and O2, struck a deal to merge their UK operations in May.
The Competition and Markets Authority (CMA) made the decision after the companies requested it fast-track to a phase 2 investigation of the merger last month.
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The CMA said it is moving to a full investigation because the merger could have an impact on competition in the telecommunications market.
“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 CMA said.
The deal will create a new telecoms heavyweight by combining the UK’s second-largest broadband network with the largest mobile operator. Virgin Media has 5.3 million broadband, pay-TV and mobile users, while O2 has 34 million mobile customers.
Virgin Media and O2 provide wholesale services to other mobile operators in the UK. The CMA is “concerned” that following the merger Virgin Media and O2 may have an incentive to raise prices or reduce the quality of those services, “ultimately leading to a worse deal for UK consumers”.
In 2016 the £10bn acquisition of O2 by Hutchison, which owns the mobile operator Three in the UK, was blocked by the European commission, a move supported by the CMA and Ofcom.
However, the Virgin-O2 merger is a more similar combination to BT’s £12.5bn takeover of the mobile company EE four years ago, which was given the green light by the CMA.
The CMA was granted permission to investigate the deal, which values Virgin Media at £18.7bn and O2 at £12.7bn, in November after the European commission handed over the case to the UK regulator. Under European law, the biggest mergers are usually handled by regulators in Brussels.
However, the CMA asked to take the case because the deal only has an impact on UK customers and the time period of the investigation will go beyond the end of the transition period for when Britain leaves the EU.
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