By Lina Saigol
The £31 billion ($43.2 billion) merger between Virgin Media and O2 has been provisionally cleared by the U.K.’s competition watchdog, after it found the deal was unlikely to lead to reduced competition or higher prices for wholesale mobile services.
U.S. tycoon John Malone’s cable group Liberty Global /zigman2/quotes/205000522/composite LBTYA +0.08% and Spain’s Telefónica /zigman2/quotes/207034643/composite TEF +1.37% , the respective owners of Virgin Media and O2, agreed a deal in May 2020 to combine their U.K. operations in a 50-50 joint venture.
The deal, which brings together O2’s 34 million mobile network customers with Virgin’s 5.3 million broadband, pay-TV and mobile users, will create a national champion to challenge the country’s current top operator, BT Group /zigman2/quotes/209006687/delayed UK:BT.A +1.46% .
The Competition and Markets Authority (CMA) fast-tracked an in-depth investigation into the deal in December to look at whether the tie-up could result in higher price rises for consumers or a drop in service quality.
Companies like Sky, which is owned by Comcast /zigman2/quotes/209472081/composite CMCSA +0.99% , use mobile networks such as O2’s to run separately branded mobile services, while Vodafone /zigman2/quotes/202862751/composite VOD +1.79% leases lines from Virgin Media to support its network.
Both Sky and Vodafone had raised objections to the deal.
However, on Wednesday, Martin Coleman, the chair of the CMA’s inquiry panel into the merger, said that after a “thorough analysis” the watchdog had concluded 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 said there is enough competition for wholesale deals from rivals, such as from BT, and its Openreach subsidiary, as well as smaller players, to require Virgin and O2 to keep providing fair deals.
Responding to the CMA’s ruling in a joint statement, Liberty Global and Telefónica, said: “We continue to work constructively with the CMA to achieve a positive outcome and continue to expect closing around the middle of this year.”
Last week, the two companies named Virgin Media’s head Lutz Schüler as chief executive of the new joint venture, while Patricia Cobian, chief financial officer of O2, will take up the same position in the merged company.