CMA asks for right to probe O2/Virgin merger

Competition and Markets Authority requests right to probe potentially game-changing joint venture that could transform UK’s wired and wireless communications provision

The UK’s Competition and Markets Authority (CMA) has asked the European Commission (EC) to refer to it for investigation the proposed joint venture between Telefónica and Liberty Global to merge their O2 and Virgin Media/Virgin Mobile businesses.

The proposed combination of Virgin Media and O2 would create a nationwide integrated communications provider with more than 46 million video, broadband and mobile subscribers and an estimated £11bn of revenue.

It comprises O2’s core network of mobile users, as well as those from mobile virtual network operators (MVNOs) Giffgaff, Sky Mobile, Tesco Mobile and Lycamobile, along with the Virgin cable network, which is rapidly being upgraded for gigabit broadband.

Crucially, it will add to Virgin’s fixed network O2’s expanding 5G infrastructure, which would enable the merged company to compete head-on with BT and its EE mobile subsidiary, which has taken a clear lead in UK 5G.

When the deal was first announced in May 2020, Telefónica and Liberty Global said they expected it to close around the middle of 2021, subject to regulatory approvals and other conditions. The former has now kicked in.

The proposed merger falls under the remit of the EC to review but can, subject to the EC’s agreement, be transferred to the CMA, which now believes the case should be transferred to its purview, given its potential impact on competition in several retail and wholesale telecommunication markets in the UK. It says the legal requirements for the case to be transferred have been met, and any impact on competition will be limited solely to UK consumers.

The CMA said that although it recognised that the EC has previously highlighted its strong interest in ensuring consistency across different merger cases in the telecoms sector, it was confident that such a line of thought was not relevant in this case, given the imminent end of the transition period following the UK’s exit from the EU.

“We have sent a formal request to the European Commission to review the proposed deal between Virgin and O2,” said CMA chief executive Andrea Coscelli. “Ultimately, this is a decision for the EC, but as the merger will only impact UK consumers – and any effects would only be felt after the end of the transition period – it is only right for the CMA to request it back.”

The CMA has issued an initial deadline of 19 November 2020 for the EC to respond to its request.

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