The Competition and Markets Authority (CMA) has responded to requests from O2 and Virgin Media to fast-track the merger review process and proceed with an investigation
Back in May, Telefonica’s UK arm O2 and Liberty Global’s Virgin Media agreed to a merger set to shake the UK telecoms market to its core. The 50–50 joint venture is set to cost around £31 billion, creating a converged entity well positioned to take on incumbent BT.
However, a merger of this size naturally faces intense scrutiny from regulatory bodies and today the government has announced that it has referred the merger to an in-depth competition investigation.
“The CMA is concerned that, following the merger, Virgin and O2 may have an incentive to raise prices or reduce the quality of these wholesale services, ultimately leading to a worse deal for UK consumers,” said the CMA in a statement, explaining their decision.
Back in 2016, the CMA blocked the proposed merger of O2 and Three on similar grounds, claiming it would reduce customer choice and lead to increased prices. However, the CMA did permit BT to merger with EE around the same time.
Now, this investigation was reportedly requested by both Virgin and O2, who would like to see the approval process fast-tracked and pushed through as quickly as possible.
Until relatively recently, approving the merger was under the jurisdiction of the European Commission, which were set to give provisional rulings in November. However, the CMA has argued that they should be in charge of the approval process, arguing that it primarily affects the UK market and that it would theoretically close after Brexit, when the UK is no longer held to EU law. The Commission ultimately handed over control in mid November.
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 deal is now expected to close around the middle of 2021.
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