CMA greenlights Virgin and O2 merger

The Competition and Markets Authority (CMA) has provisionally approved a £31bn merger between mobile networks Virgin Media and O2. This follows a CMA investigation into the proposals last December.

The CMA was not concerned about overlapping retail services such as mobile, due to the small size of Virgin Mobile. As such, its review focused on whether the merger could lead to reduced competition in wholesale services.

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 2 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.”

The CMA inquiry group pointed to several reasons for its decision. Firstly, it found that backhaul costs are a relatively small element of rival mobile companies’ overall costs, so it is unlikely that Virgin would be able to raise backhaul costs in a way that would lead to higher charges for consumers.

It also stated that there are other players in the market offering the same leased-line services, including BT Openreach, which has a much greater geographical reach than Virgin. This means the merged company will still need to maintain the competitiveness of its service or risk losing wholesale custom.

Finally, there are a number of other companies that provide mobile networks for telecoms firms to use, meaning O2 will need to keep its service competitive with its wholesale rivals in order to maintain this business.