CMA approves £31 bn O2 - Virgin Media merger

Announcement clears the way for the creation of one of the world's largest media companies to take on BT and Sky

The Competition and Markets Authority (CMA) has given the green light for the merger of O2 and Virgin Media.

The announcement comes after an investigation by the regulator into the wholesale of services to mobile operators, having been concerned that, following the merger, Virgin and O2 could raise prices or reduce the quality of these wholesale services.

However, the CMA inquiry found that the deal would be unlikely to shut out competition in the wholesale leased line and mobile services markets.

Virgin Media is a supplier of leased line services, but the regulator said that competition from the likes of BT Openreach and other smaller providers, together with the fact that leased lines make up only a small proportion of rival mobile companies' overall costs, means that the combined entity would be unlikely to affect the pricing or quality of service to any degree.

A similar situation exists with mobile network services, in that "there are a number of other companies that provide mobile networks for telecoms firms to use, meaning O2 will need to keep its service competitive with its wholesale rivals in order to maintain this business," the CMA said.

Martin Coleman, CMA panel inquiry chair, said in a statement: "O2 and Virgin are important suppliers of services to other companies who serve millions of consumers. It was important to make sure that this merger would not leave these people worse off. That's why we conducted an in-depth investigation."

He added: "After looking closely at the deal, we are reassured that competition amongst mobile communications providers will remain strong and it is therefore unlikely that the merger would lead to higher prices or lower quality services."

O2, owned by Telefonica, has more than 35 million mobile network customers, including on mobile virtual network operators like GiffGaff, while Virgin Media, owned by Liberty Global, has more than five million subscribers to its broadband, mobile and TV services.

With the CMA hurdle cleared, the 50:50 merger is expected to close by 1 June. It will create one of the largest telecoms companies in the world, valued at around £31 billion, dwarfing the £12.5 billion acquisition of EE by BT in 2015.

In a joint statement, Mike Fries, CEO of Liberty Global, and José Maria Alvarez-Pallete, CEO of Telefonica, commented: "This is a watershed moment in the history of telecommunications in the UK as we are now cleared to bring real choice where it hasn't existed before, while investing in fibre and 5G that the UK needs to thrive."

News of the planned merger first emerged in May 2020. It will reshape UK's telecoms industry, according to industry experts, enabling the new entity to take on the likes of BT and Sky.