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Competition Watchdog to Investigate O2-Virgin Media Merger

CMA-to-investigation-O2-Virgin-Media-merger

The Competition and Markets Authority (CMA) will probe the proposed merger between mobile operator O2 and broadband provider Virgin Media over concerns it could reduce competition in the telecoms market and lead to higher prices for consumers.

The £31 billion merger of the UK operations of Spanish company Telefónica and Virgin Media owner Liberty Global was first mooted in May. 

Last month, the European Commission handed the authority for the investigation into the merger to the UK after finding that the merger will only exclusively impact UK consumers and that the investigation will extend beyond the UK’s exit from the European Union on 31 December.

The CMA has now said it will launch a full examination of the merger, rejecting the companies’ request that the investigation is fast-tracked to phase 2. 

The watchdog said it was opting for a full investigation because the merger could impact competition in the telecommunications sector.

“There is sufficient evidence at an early stage of the investigation for the CMA to conclude that there is a realistic prospect that the transaction would result in a substantial lessening of competition in one or more markets,” the CMA said.

Virgin Media and O2 provide wholesale mobile and broadband services to other businesses and the CMA is “concerned” that following a merger they might have an “incentive to raise prices or reduce the quality of these wholesale services, ultimately leading to a worse deal for UK consumers.”

If approved, the merger will combine the UK’s largest mobile operator, with 34 million customers, and its second-largest broadband network, with 5.3 million broadband, pay-TV and mobile subscribers. The resulting company will have £11 billion in annual revenue and rival BT and Sky for dominance of the UK’s telecommunications market.

A previous proposed £10 billion sale of O2 to Three owner Hutchinson was blocked by the European Commission in 2016, after receiving support from the CMA and Ofcom.

However, the Virgin-O2 merger is seen as similar to broadband giant BT’s £12.5 billion takeover of mobile operator EE in the same year, which received the CMA’s stamp of approval and went ahead.

Lauren Smith
Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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