O2 and Virgin Media merger provisionally cleared

An in-depth investigation of the proposed merger between the two was fast-tracked after the CMA expressed concerns about competition.

These concerns were mainly based around infrastructure rather than the services offered by the providers to their customers.

However, the CMA has concluded competition won't be substantially lessened by the joint venture going ahead this year.

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Investigation

A merger bid between O2's owner Telefonica and Virgin's owner Liberty Global was confirmed in May 2020, with the CMA announcing in December 2020 they were moving rapidly to an in-depth investigation to analyse competition concerns.

The investigation has concluded:

• Concerns about backhaul costs affecting rival mobile companies are unlikely to lead to Virgin raising costs in a way that would lead to higher charges for customers.
• Virgin is only one player offering leased-line services to customers and their reach is limited geographically, so they need to stay competitive rather than risk losing wholesale custom.
• O2 will need to keep their leased-line mobile network competitive or other telecoms firms will simply take their business to one of their rivals.

These points relate to technical issues customers generally wouldn't be interested in unless they started to affect their mobile and broadband bills. The CMA has concluded that won't be the case.

What happens next?

The decision by the CMA is provisional as they have to accept representations from interested parties after drawing their conclusions.

With the final date for representations scheduled as 5 May 2021, it should be clear very soon whether the merger is going to go ahead as planned.

However, realistically, there's very little chance of the CMA changing their mind at this point unless something dramatic happens in the interim.

They have concluded customers won't suffer from reduced competition thanks to this joint venture, and that's their main focus.

So, we can expect the joint venture to be completed in 2021. O2 and Virgin have already started to plan for this by announcing the new Chief Executive Officer (CEO) and Chief Financial Officer (CFO) for the combined company earlier this month.

What does the merger mean for customers?

O2 joining forces with Virgin Media creates a telecoms giant to rival BT/EE.

Between them, they will have over 5 million broadband customers and over 32 million mobile customers coupled with smaller numbers of pay TV and fixed-line voice customers.

They've proposed investment of an additional £10bn into the UK's telecoms market by 2026, accelerating the deployment of 5G and the DOCSIS 3.1 gigabit-capable broadband network currently offered by Virgin Media to around 6.8 million customers.

Another ambition (rather than a solid proposal) is to connect an additional 7 million homes to their network in the coming years. This would see Virgin's network likely start to move beyond their urban heartlands into smaller communities.

Its also probable Virgin services will start to be showcased in O2's high street stores after the closure of their remaining shops in 2020.

Yet there are complications that may give customers headaches such as the fact Virgin Mobile customers will be swapping networks again at some point in the future.

Just before the joint venture was confirmed, Virgin Mobile announced they were moving their mobile services from EE's network to Vodafone's, and they launched 5G services on the Vodafone network at the beginning of 2021.

This means we'd expect Virgin Mobile customers to undergo two network shifts in the next five years or so. This may be fine but, as we explained last month when Asda Mobile began the switch to Vodafone's network, it can require action from customers and doesn't always run smoothly.