The merger could cause a ripple effect in the UK telecoms market say analysts
The proposed £31bn merger between Virgin Media and O2 has been provisionally cleared by the UK’s competition watchdog.
It comes almost a year after it emerged the two parties were in talks to strike a deal.
Liberty Global, which owns Virgin, and Telefonica, which owns O2 announced the deal in May 2020.
The merger has been subject to scrutiny but has been cleared by The Competition and Markets Authority (CMA) following a lengthy investigation into the deal.
In a statement today (April 14) the CMA concluded that any deal is ‘unlikely to lead to any substantial lessening of competition’.
The merger is expected to be a 50-50 joint venture and will combine O2’s 34 million mobile customers and Virgin Media’s 5.3 million broadband, pay TV and mobile users.
During the investigation the CMA also made it clear it was unconcerned by the overlapping of consumer services such as the MVNO Virgin Mobile due to its small size.
CMA panel inquiry chair Martin Coleman said: “Given the impact this deal could have in the UK, we needed to scrutinise this merger closely.
“A thorough analysis of 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.”
CCS Insight consumer and connectivity director Kester Mann said the CMA’s decision comes as no surprise.
He also expects the merger to create a significant rival for BT.
“The CMA’s provisional approval comes as no surprise given that the deal does not create a significantly stronger player in either the fixed-line or mobile markets.
“The blockbuster merger will transform the UK telecoms landscape and create a powerful new converged provider to rival BT.”
The deal might also have further implications within the UK market, adds Mann, who said further mergers could take place.
“The deal could still trigger a ripple effect on the UK market: Further deal-making – potentially including Vodafone, Three and Sky – can’t be ruled out.”
Uswitch mobiles expert Ernest Doku also anticipates the market to shake up.
“The merger is likely to stir up the industry, with Vodafone previously showing interest in Virgin Media and Three attempting to snap up O2 five years ago.
“Both the O2 and Virgin Media brands are likely to remain in the short term, but we will have to see what this means for existing products and services like O2 Priorities.”