Is the O2–Virgin Media merger bad for customers? CMA investigates

Back in May 2020, mobile operator O2 and fixed operator Virgin Media announced they were seeking to merge their operations for an enormous £31 billion. 

The move seemed like a natural fit – each operator could provide the other with the infrastructure and customer base that they were missing, allowing O2 to enter the fixed market and Virgin to begin mobile operations. At the time, operators said that the newly merged entity would be well positioned to take on the hegemony of BT in the UK, directly increasing competition in the telecoms sector.

Now, however, the CMA is set to investigate the merger and the truth of these competition claims. The watchdog says that it is concerned that mobile virtual network operators (MVNOs) that currently use O2’s mobile network could have their service reduced or their prices increased, which in turn will drive up the cost to consumers. This could even lead to the loss of competition entirely if the MVNO were to lose access to their customers as a result. 

Currently, Sky Mobile, Tesco Mobile, and Lycamobile are among the MVNOs that make use of O2’s network.

Similarly, the regulator is also set to explore whether Virgin Media would be incentivised to modify the terms upon which it leases backhaul connectivity to other mobile network operators. Virgin currently provides backhaul for both Vodafone and Three, two of O2’s major rivals.

Naturally, the companies themselves remain confident that the regulators fears will prove unfounded.

“Our view remains that this transaction is pro-competitive and we continue to expect closing around the middle of this year,” said Liberty Global (Virgin Media) and Telefonica (O2) in a joint statement. 

Far from harming UK customers, the two companies claim the merger will create around 5,000 UK jobs, with the move being “good for the country” according to Virgin Media CEO Lutz Schuler speaking at Connected Britain earlier in the year.

The CMA took over the regulatory jurisdiction for the merger from the European Commission in December last year, arguing that the move would primarily affect UK customers and that the deal would close post-2020, after which Brexit would have taken place.

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