£ 31 billion merger between Virgin Media and O2 won’t result in higher prices for mobile customers, says CMA Business News

A £ 31 billion merger between O2 and Virgin Media was given the green light after regulators ruled the deal is unlikely to result in higher broadband and mobile prices for consumers.

The Competition and Markets Authority opened an investigation into the merger in December, fearing that customers were the losers.

There were concerns that the powerful position of the merged company would allow it to make its offering more attractive by reducing the quality or increasing the price of the services it provides to other mobile and internet companies.

Sky Mobile, one of several operators that pays O2 to use its network, had said the merger would hurt its business.

After a five-month investigation, the CMA decided that the newly merged telecommunications giant would still have an incentive to keep prices and services competitive.

He pointed to other mobile network providers that offer similar services and BT Openreach, which leases fixed lines to broadband companies.

The watchdog’s decision is provisional and a final decision is expected to be released before the end of May.

The merger will bring together 34 million customers on O2’s mobile network with Virgin Media and Virgin Mobile’s 5.3 million broadband, pay TV and mobile users.

CMA Board of Inquiry Chairman Martin Coleman said: “Given the impact this deal could have in the UK, we needed to take a close look at this merger.

“A thorough analysis of the evidence gathered during our phase two investigation showed that the deal is unlikely to lead to higher prices or lower quality of mobile services – which means customers should continue. to benefit from strong competition. “

The CMA’s so-called Phase 2 investigation was launched in December following a request from companies asking the watchdog to quickly give the green light to the deal.

The CMA said up front that it was not concerned about the overlap of retail services such as mobile, due to Virgin Mobile’s small size, but instead focused on potential service issues. wholesale.

Virgin provides wholesale leased lines to mobile companies, such as Vodafone and Three, which they use to connect key parts of their network.

Likewise, O2 offers mobile operators such as Sky and Lycamobile, which do not have their own mobile network, to use the O2 network to provide their customers with mobile phone services.

The CMA was initially concerned that as a result of the merger, Virgin and O2 could increase the prices or reduce the quality of these wholesale services, or withdraw them altogether.

If this were to happen, the quality of the mobile services of these other companies could suffer and – if the increases in wholesale prices were passed on by these companies to their customers – their retail prices could increase.

“This could make Virgin and O2’s mobile service comparatively more attractive to retail customers, but ultimately lead to a worse deal for UK consumers,” the CMA said.

However, the watchdog concluded that this was not the case, as the costs of renting this infrastructure are a relatively small share of the overall costs of mobile operators, so prices are unlikely to increase enough to meet have an impact on consumers.

There are also other players in the market offering the same services, CMA said.

The deal values ​​Virgin Media, which is owned by Liberty Global, at £ 18.7 billion and Telefonica’s O2 at £ 12.7 billion.

When the deal was announced, the companies said it would create a “fully converged platform” for customers, which would mean a £ 10bn investment in the UK over the next five years. coming years.


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This notice was published: 2021-05-20 14:21:37