Virgin Media and O2 mega-merger confirmed after regulators give green light

20 May 2021, 08:26 | Updated: 20 May 2021, 09:14

A multi-billion-pound merger between Virgin Media and O2 has been confirmed after regulators officially approved the deal.

The Competition and Markets Authority (CMA) approved the £31 billion mega-merger following an in-depth investigation which found that concerns customers had over subsequent price hikes were unfounded.

Martin Coleman, the chairman of the CMA inquiry, 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."

O2 is the UK's biggest mobile phone operator with around 36.6 million customers across its networks, which also include giffgaff, Tesco Mobile, Sky Mobile and Lycamobile. Meanwhile, Virgin Media has around 5.3 million customers.

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What will the deal mean for customers?

The deal should not cause prices to go up for customers, nor should it affect the quality of the services.

There will also still be "strong" competition in the mobile communications sector, the CMA added.

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The deal, which was first announced a year ago and was provisionally cleared last month, will mean an investment of £10 billion in the UK over the next five years.

There were worries that the merger would lead to price increases for customers.

But the investigation found this was unlikely for a number of reasons.

The costs of leased lines are only a relatively small element of rival mobile companies' overall costs, so it is unlikely that Virgin would be able to raise leased-line costs in a way that would lead to higher charges for consumers.

The investigators also said that competitors in the market offering the same leased-line services, including larger rival BT Openreach, would keep competition healthy, and that O2 would need to remain competitive with its wholesale rivals.

The CMA said at the outset of the investigation that it was not concerned about overlapping retail services such as mobile, due to the small size of Virgin Mobile, but instead focused on potential wholesale services concerns.

The UK competition watchdog was only granted permission to investigate the deal after the European Commission handed over the case in November.

Under European law, the biggest mergers are generally dealt with by the commission's regulators in Brussels.

But the CMA asked Brussels regulators to hand the case back because it primarily only affected UK customers and because any findings would come after the Brexit transition period had ended.

Mike Fries, chief executive of Virgin owner Liberty Global, and Jose Maria Alvarez-Pallete, boss of O2 owner Telefonica, said: "This is a watershed moment in the history of telecommunications in the UK as we are now cleared to bring real choice where it hasn't existed before, while investing in fibre and 5G that the UK needs to thrive."