The Strategist

UK watchdog approves $38B Virgin Media-O2 merger

05/21/2021 - 04:26

The UK Competition and Markets Authority (CMA) has given final approval for the merger of UK telecoms operators Virgin Media and O2.
The merger was announced a year ago by their parent companies, the Anglo-American Liberty Global and the Spanish Telefonica. The deal was negotiated over five months and will result in the creation of the UK's largest integrated telecommunications company providing both mobile and fixed broadband services.

In explaining its decision, the CMA said that the parameters and implications of the Virgin Media and O2 merger had been assessed by a panel of independent experts. It concluded that the merger would be unlikely to trigger an increase in fixed-line prices because the costs of maintaining these lines are a small fraction of the overall costs of both companies. 

In addition, there are many other players in the market that operate such networks on a much larger scale and in more regions. Thus, the merger will not disrupt competition by creating a monopoly in the UK fixed-line market. On mobile telephony, experts also noted the high level of competition in this sector in the UK and considered that "O2 will have to maintain its services at a high level to successfully compete with other market players".

As Martin Coleman, head of the CMA's scrutiny committee, said, "Virgin Media and O2 are important service providers to other companies and millions of consumers. It was important for us to make sure that this merger would not harm people, which is why we launched this review. After reviewing the transaction, we concluded that there was a lot of competition among mobile operators, so the merger was unlikely to raise prices or reduce service quality.