{"id":26559,"date":"2021-04-14T09:01:02","date_gmt":"2021-04-14T08:01:02","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=26559"},"modified":"2021-04-14T09:06:38","modified_gmt":"2021-04-14T08:06:38","slug":"cma-provisionally-clears-virgin-media-uk-and-o2-to-merge","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2021\/04\/cma-provisionally-clears-virgin-media-uk-and-o2-to-merge.html","title":{"rendered":"CMA Provisionally Clears Virgin Media UK and O2 to Merge"},"content":{"rendered":"

The UK Competition and Markets Authority<\/a> has today “provisionally<\/em>” cleared the proposed \u00a331bn (total enterprise value) mega merger between broadband provider Virgin Media<\/a> (Liberty Global) and mobile operator O2<\/a> (Telefonica), which will light the fuse on a major \u00a310bn project to extend “full fibre<\/em>” FTTP<\/a> and 5G<\/a> mobile services.<\/p>\n

The CMA had previously raised some competition concerns about the new 50-50 joint venture (here<\/a> and here<\/a>). Key issues reflected concerns over the risk of higher prices for consumers, as well as any anti-competitive impacts upon the wholesale focused Mobile Virtual Network Operator<\/strong> (MVNO) market and the market for business leased lines (e.g. those used to supply capacity to mobile operators \/ masts).<\/p>\n

Despite this the merged company had always positioned their deal as being “pro-competitive<\/em>” and a similar merger between BT<\/a> and EE<\/a> was able to sail through the CMA’s process without causing any big problems. In theory, there shouldn’t have been too many obstacles to the deal since both operators\u2019 largely focus on different parts of the UK telecoms market.<\/p>\n

In the end the CMA has provisionally concluded that “the deal is unlikely to lead to any substantial lessening of competition in relation to the supply of wholesale services<\/em>” and they gave several reasons for this.<\/p>\n

Reasons for the CMA’s Provisional Approval<\/strong><\/span><\/p>\n

\u27a4 Backhaul costs are only a relatively small element of rival mobile companies\u2019 overall costs, so it is unlikely that Virgin would be able to raise backhaul costs in a way that would lead to higher charges for consumers.<\/p>\n

\u27a4 There are other players in the market offering the same leased-line services, including Openreach<\/a> (BT<\/a>) – which has a much greater geographical reach than Virgin – and other smaller providers. This means the merged company will still need to maintain the competitiveness of its service or risk losing wholesale custom.<\/p>\n

\u27a4 As with leased-line services, there are a number of other companies that provide mobile networks for telecoms firms to use, meaning O2<\/a> will need to keep its service competitive with its wholesale rivals in order to maintain this business.<\/p><\/blockquote>\n

What comes next?<\/strong><\/span><\/h3>\n

The combined business has already proposed to invest a further \u00a310bn<\/strong> into the UK by 2025\/26 (here<\/a>). The money would be used to help acceleration the deployment of ultrafast 5G<\/a> mobile (mobile broadband) and to expand their gigabit-capable home broadband network (via DOCSIS<\/a> 3.1) to reach an extra 1 million premises “within 12 months of the merger closing<\/em>” (total of 16 million).<\/p>\n

On top of that the merged company has also previously spoken of their “ambition to accelerate investments<\/em>” and connect a further 7 million homes<\/strong> to their gigabit broadband network “in the coming years<\/em>.” Such a major network extension, using Fibre-to-the-Premises<\/strong> (FTTP<\/a>) technology, would see them move into many smaller towns and villages.<\/p>\n