European Commission refers proposed O2-Virgin merger to CMA

Both parties welcome the move, expect a ‘seamless transition’

The European Commission has referred its review of the proposed merger of Virgin Media and O2 to the Competition and Markets Authority (CMA) for investigation.

This is a culmination of the regulatory body’s request to review the merger following its announcement in May due to its potential impact on competitiveness in the UK telecoms market.

The CMA formally requested the case be transferred on October 8, which the EC has today accepted. The case will be transferred immediately.

CMA chief executive Andrea Coscelli welcomed the move. “These are incredibly important UK markets that continue to evolve, and the deal needs to be carefully reviewed to make sure that consumers are protected,” he said.

In a joint statement, O2 and Virgin’s respective parents Telefónica and Liberty Global said they were happy with the decision, and were “confident the transition will be seamless”.

“Our view remains that this transaction is pro-competitive and we continue to expect closing around the middle of next year,” the statement said.

O2 and Virgin’s merger, should it go ahead, will give the duo more than 40 million subscribers across mobile, broadband and TV.

At the time of its announcement, cable.co.uk analyst Dan Howdle said he didn’t expect the deal to be blocked.

“A combination of O2 and Virgin Media is a natural fit,” he added. “Each side gains crucial assets it severely lacks: a mobile network for Virgin and a fixed-line arm for O2.”

Transition

Josh Buckland, managing associate at global law firm Linklaters, said that the referral was indicative of the UK’s changing relationship to the European Union.

“The looming end of the transition period was likely to be the decisive factor in the Commission’s decision to refer this case to the CMA,” he said. “The key reason the Commission previously refused to refer the Three UK/O2 deal to the CMA [in 2016] was because it wanted to ensure a ‘coherent and consistent approach’ to assessing telecoms mergers throughout the EU.

“With the UK leaving the EU and the transition period shortly coming to an end, that rationale becomes redundant. The CMA winning jurisdiction over this major deal is certainly a sign of things to come with the authority having increased jurisdiction over mergers from the start of next year.”