CMA gives provisional clearance to merger of O2 UK and Virgin Media

14 Apr 2021

The UK’s Competition and Markets Authority (CMA) has provisionally approved the proposed merger of O2 UK and Virgin Media. In a press release regarding its stance on the matter, the CMA said it had been clear at the outset of its in-depth inquiry that it was not concerned about overlapping retail services such as mobile, due to the small size of Virgin Mobile, and as such noted it had focused its review on whether the merger could lead to reduced competition in wholesale services. According to the CMA, it had initially been concerned that – following the merger – O2 UK and Virgin Media could raise prices or reduce the quality of these wholesale services, or withdraw them altogether.

However, having now examined the evidence, the CMA inquiry group has provisionally concluded that the deal is ‘unlikely to lead to any substantial lessening of competition in relation to the supply of wholesale services for several reasons’. Such reasons were said to include: that backhaul costs are only a relatively small element of rival mobile companies’ overall costs, and as such the CMA views it as unlikely that Virgin Media would be able to raise backhaul costs in a way that would lead to higher charges for consumers; and that there are other players in the market offering the same leased line services, including Openreach – which has a much greater geographical reach than Virgin Media – and other smaller providers, with this meaning that the merged O2-Virgin would still need to maintain the competitiveness of its service or risk losing wholesale custom.

Commenting on the matter, Martin Coleman, CMA Panel Inquiry Chair, said: ‘Given the impact this deal could have in the UK, we needed to scrutinise this merger closely. A thorough analysis of the evidence gathered during our phase two investigation has shown that the deal is unlikely to lead to higher prices or a reduced quality of mobile services – meaning customers should continue to benefit from strong competition.’

United Kingdom, Liberty Global, O2 UK, Telefonica, Virgin Media