Wednesday, 25 November 2020

Sun shining on Liberty Global’s Swiss merger, but cloudier skies for UK’s O2 deal

by Harry Baldock, Total Telecom
Wednesday 18 November 20

The UK Competition and Markets Authority (CMA) is set to review the proposed merger of Liberty Global’s Virgin Media with Telefonica’s O2

Last week, Liberty Global wrapped up its acquisition of Sunrise, almost three months on from the deal’s announcement.    Liberty Global said that it will not merge Sunrise immediately with UPC, the Swiss operator that it has owned since 2005, but would instead let them work independently until early 2021…

Last week, Liberty Global wrapped up its acquisition of Sunrise, almost three months on from the deal’s announcement. 
 
Liberty Global said that it will not merge Sunrise immediately with UPC, the Swiss operator that it has owned since 2005, but would instead let them work independently until early 2021. 
 
Once merged, the new business is expected to be a major challenger for incumbent Swisscom, which currently dominates the Swiss market by a large margin. Liberty Global says the merger should generate revenues of around €2.87 billion.
 
Just yesterday, Liberty Global added André Krause, Sunrise’s current CEO, as the head of the new combined business.
 
But while Liberty Global’s Swiss merger has been relatively smooth sailing, its proposed merger in the UK is having a much rougher time.
 
The proposed 50–50 merger of Virgin Media with Telefonica’s O2 is, much like the Sunrise–UPC merger in Switzerland, targeted at challenging the hegemony of the resident incumbent, in this case BT. The roughly £40 billion merger should generate synergies of around £6.2 billion, with both partners gaining access to what they need: Virgin Media gains a mobile arm, while O2 gains a fixed line network.
 
But attaining regulatory approval for the move is proving difficult, in part since it is unclear who should take the lead. Initially, the EU’s antitrust regulator has been set to oversee the deal, but the UK’s CMA has been arguing since October that it should be the one to conduct the review, since the deal has significant implications for the UK, as well as due to complications due to Brexit looming on the horizon. 
 
Earlier this week, the EU regulators have reportedly handed over the reins to the CMA, just two days before the Commission’s preliminary review was scheduled to end. 
 
Ceding control like this is quite uncommon for the EU, which has generally preferred to retain the final authority when it comes to approving mergers, especially of this scale, in order to retain some form of consistency across Europe. But, with the UK set to officially cut ties with the EU on December the 31st, it seems that the EU regulators ultimately have little choice in passing the baton in this case.
 
 
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